Kuwait’s energy projects market is set for a major boost over the next couple of years, with more than $30bn-worth of engineering, procurement and construction (EPC) contracts set for award by 2016. This follows the approval of several deals for the long-delayed Clean Fuels Project (CFP) in early February, the surest sign yet that the Gulf state’s long-running project malaise could finally be over.

Since its launch in 2007, the CFP has suffered repeated setbacks due to bureaucracy and the tense relationship between the government and parliament. But three contracts worth a combined total of almost $12bn have now been awarded by Kuwait National Petroleum Company (KNPC) to consortiums led by Japan’s JGC Corporation, the UK’s Petrofac, and the US’ Fluor Corporation. At $4.8bn, JGC’s deal is the largest single contract ever awarded in the GCC.

New refinery

Following closely behind the CFP is the New Refinery Project (NRP). KNPC has now selected several EPC groups to bid on two of the scheme’s packages. However, these do not include a list of prequalified firms for the refinery’s main process plants or the offsites and utilities package, despite bids having been submitted almost a year ago. KNPC has previously said it would wait for the results of the CFP bids before issuing tenders for the new refinery, meaning further progress is imminent.

KNPC’s parent company, state-owned Kuwait Petroleum Corporation (KPC) is still conducting studies into integrating two new petrochemicals facilities into the refinery site. The plan has yet to receive approval from the Supreme Petroleum Council, meaning a tender may not be issued before September.

Although KNPC has tendered the NRP twice before only to cancel it after awards were made, there is greater optimism from contractors that the deals will go ahead this time. The new refinery is key to the country’s hopes of meeting growing power demand. The 615,000 barrel a day (b/d) facility will supply 225,000 b/d of low-sulphur fuel oil for power generation.

Kuwait Oil Company (KOC) also has significant plans. Bids are due in May for the Lower Fars heavy oil development, one of the Gulf’s largest ever schemes to be executed as a single EPC package, with a budget of $4.2bn.

Spread over 1,200 square kilometres in Kuwait’s northern desert, the Lower Fars reservoir contains 7-15 billion barrels of oil. The problem, however, is that the reservoir holds heavy oil with a gravity ranging from 17 API to as low as 11, whereas KOC’s regular crude blends have an average gravity of about 30 API. It is also highly viscous.

Pioneering technologies

To address this, KOC plans to use cyclic steam stimulation, the first deployment in the region, which involves the injection of steam into the reservoir to heat the oil, making it easier to pump to the surface. Once extracted, the oil will be sent through a pipeline to the new refinery to be processed into fuel oil or blended with lighter oils for export.

The project is a major component of Kuwait’s plans to increase its oil production capacity. KOC is currently able to produce about 3 million b/d, a figure it hopes to increase to 3.2 million b/d by 2015 and 3.7 million b/d by 2020. The Gulf state will spend $45bn up to 2019 on new infrastructure to meet these targets, making it a market with huge potential for contractors and suppliers.