Kuwait to decide future of Al-Zour refinery by April

17 February 2010

State firm aims to capitalise on drop in engineering and material costs

Senior executives at Kuwait National Petroleum Company (KNPC) will meet with the country’s newly formed Supreme Petroleum Council (SPC) to discuss the fate of a planned $15bn refinery before the end of March, according to sources close to the matter.

The council, Kuwait’s highest decision-making organisation for the oil and gas industry, was only officially inaugurated on 3 February when the country’s emir, Sheikh Sabah al-Ahmed Al-Jaber al-Sabah, issued a decree for its formation (MEED 7:2:10).

The government had been expected to announce a new SPC in May 2009 after parliamentary elections, but struggled to find qualified candidates who were willing to take seats.

Executives from the state refiner held a preliminary meeting with the new SPC on 7 February to discuss the company’s 2010-2011 budget and form a subsidiary council to supervise the company’s work, a senior executive tells MEED.

A second meeting will be held before the end of March to discuss future projects including the planned 615,000-barrel-a-day (b/d) refinery at Al-Zour.

“KNPC will meet the SPC again to discuss the new refinery and hopefully they will pass it straight away,” says a senior source at state energy giant Kuwait Petroleum Corporation (KPC), the parent company of KNPC.

The SPC told KNPC to cancel five engineering, procurement and construction contracts to build the refinery in March 2009, after parliamentarians questioned the way the deals were awarded (MEED 16:3:09).

The contracts were awarded a year earlier, although construction work had not begun when the deals were cancelled.

KNPC has been planning to retender the deals since they were cancelled. However, it cannot do so without the SPC’s approval, and until the council was formed the project was not moving ahead.

The company now hopes to have the project approved as soon as possible to capitalise on a drop of up to 20 per cent in engineering and material costs during 2009.

“There are new SPC members who will need the background of the refinery and why it was cancelled last year,” says the KPC executive. “But we want to have [the construction deals] done by the end of the year to get a good price.”

Sources close to the project expect KNPC to take 2-3 months to prequalify contractors to bid on construction deals for the project and prepare tender documents once SPC approval has been given. It will take at least another four months for contractors to prepare and submit bids on the deals, according to the KPC executive.

A MEED Subscription...

Subscribe or upgrade your current MEED.com package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.

Get Notifications