Kuwait to decide on Al-Zour refinery in May

28 April 2010

Contractors awaiting Supreme Petroleum Council decision

Kuwait’s Supreme Petroleum Council (SPC) is expected to meet in May to make a final decision on the fate of the planned $15bn Al-Zour refinery.

The SPC delayed a decision on whether to retender the engineering, procurement and construction (EPC) contracts for the refinery at the beginning of April. Having met on 22 February, a decision was expected by the end of March, but a source close to the scheme now says it will not be until May (MEED 1:4:10). 

“The SPC have already had a couple of meetings about the refinery, and another one is coming up in May”, says the source. “We should have some movement within the next two months.”

In the meantime, Kuwait National Petroleum Company (KNPC) has asked for a reassessment of the cost of the project. Contractors originally expected to tender a feasibility study.

Five contracts for the refinery were awarded in 2008, but were cancelled in March last year by KNPC on the instructions of the SPC before work had even begun. This follows a series of questions in parliament over the manner in which the contracts were awarded. 

KNPC cannot retender the deals without the approval of the SPC, which is the highest policy body in Kuwait’s hydrocarbon sector and establishes the country’s petroleum policy.

Contractors say that had Kuwait moved ahead with the project it could have been operational by now. “Reliance Group’s refinery in Gujarat is of comparable size to the Al-Zour refinery. In 2005 and 2006, the projects were on the same track,” says one executive at an EPC contractor based in Kuwait.

The 600,000 barrel a day (b/d) refinery in India was completed at an estimated cost of $6-7bn and has been running since June 2009.

Costs on the 615,000 b/d Al-Zour refinery on the other hand have now spiralled, with estimates currently ranging between $14-15bn.

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