Kuwait revives Olefins 3 plans

08 October 2014

Multibillion-dollar petrochemicals project sees new momentum

Kuwait’s Petrochemical Industries Company (PIC) has revived plans for Olefins 3, a multibillion-dollar petrochemicals plant in the Al-Zour area.

The revival comes after years of delays and a lengthy legal battle with the US’ Dow Chemical, Kuwait’s foreign partner for the Olefins 1 and 2 projects.

Plans for the new plant are still at an early stage. It will have a budget of $5bn-$10bn and will be integrated with the $14bn New Refinery Project (NRP).

PIC has yet to acquire land for the petrochemicals project and no detailed studies have been carried out.

UK-based consultancy KBC Advanced Technologies has been hired to carry out an initial feasibility study for the scheme.

KBC has not confirmed a timescale for the feasibility study, but sources with knowledge of the firm’s operations expect the study to be completed in the first half of 2015.

In 2011, PIC said the Olefins 3 cracker would use a mixed feed of gas and liquids.

Under the original plans, the complex was slated to produce 1.4 million tonnes a year (t/y) of ethylene, 450,000 t/y of linear low density polyethylene and high density polyethylene, along with 600,000 t/y of glycols.

These figures are now out of date and the mix of products produced is likely to be changed in light of the feasibility study being carried out by KBC, according to sources close to the project.

Contractors bidding on packages for the NRP have been warned by state downstream operator Kuwait National Petroleum Company (KNPC) that plans may change in the execution phase due to the integration of the petrochemicals facility.

“KNPC has warned us there could be changes during execution,” says a source from one of the engineering, procurement and construction (EPC) companies bidding on the NRP packages. “It may request the EPC company to modify the project.”

Dow Chemical partnered with PIC for Olefins 1 and Olefins 2, as part of the Equate joint venture, but it is unclear whether the company will be involved in Olefins 3.

Dow Chemical took PIC to court after the collapse of K-Dow in 2008, one of the petrochemicals sector’s biggest deals.

The deal would have involved Kuwait paying $7.5bn to take a 50 per cent stake in a joint venture with the US firm, but it fell apart due to political infighting.

The subsequent legal battle resulted in Dow Chemical receiving $2.2bn in damages from Kuwait in 2013.

If the new complex is located adjacent to the Al-Zour refinery, it is likely to be built to the refinery’s north, due to existing developments on other surrounding sites.

Any development to the north of the refinery is expected to involve major re-routing or avoidance of electrical overhead power lines from the Al-Zour power station, according to EPC sources close to the refinery project.

The timeframe for construction of the petrochemicals plant has yet to be decided, but it is likely to start one or two years after the completion of the refinery, according to sources close to the scheme.

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