Kuwait and Oman have signed a partnership agreement to develop the sultanate’s largest single-phase project at Duqm. Kuwait will replace Abu Dhabi’s International Petroleum Investment Company (Ipic), which exited the project in 2016.

Oman Oil Company (OOC) is developing a 230,000 barrel-a-day refinery at the southern port city of Duqm to diversify its earnings from its maturing hydrocarbon assets.

Ipic, which signed a joint venture on the project in 2009 exited the project last year citing that the direction of the project, which included petrochemicals no longer fit in with its current strategy.

OOC’s partnership agreement with Kuwait Petroleum Corporation’s (KPC) subsidiary Kuwait Petroleum International is understood to be a joint venture, though the announcement did not specify the terms of the agreement.

Works relating to levelling of the 900 hectare refinery site have been completed, and foundations for the construction of the refinery will commence according to schedule, OOC said in a statement.

The agreement could be a “catalyst” to encourage collaboration between Gulf countries in the oil and gas sector, according to Nizar al-Adsani, KPC deputy chairman and chief executive.

“We hope that the refinery project will be the catalyst and ignition towards the start of similar ventures in the energy sector between GCC countries, where this mega project will ultimately lead towards transforming the Duqm area into one of the most important hubs for energy related industries regionally as well as internationally,” he said at the signing.

A final investment decision on the multi-billion dollar project will be taken by the second quarter of 2017.

MEED reported that Duqm refinery has shortlisted two consortia for the engineering, procurement and construction contract for phase one of the project, which includes a package for oil processing facilities.

Bids have also been submitted for the second package covering facilities, utilities tankage and buildings to support process.

MEED also reported that the final package of the project, which includes the development of the region’s largest crude tank farm at Ras Markaz received technical bids.

The refinery is set to produce diesel, jet fuel, naphtha and liquefied petroleum gas.

The development of Duqm refinery forms part of Oman’s efforts to diversify its economy, through integrated energy and logistics projects in towns such as Sohar and Salalah.