• Low bid on package one came in 40 per cent more than budget estimate
  • Low bid on package two came in 42 per cent over the estimate
  • Prices for the refinery’s marine package and its tankage package both came in hundreds of millions of dollars over budget

The low bids for the six unawarded packages that make up the Al-Zour New Refinery Project have come in $4.2bn over budget, stoking concerns the multibillion-dollar scheme may be retendered.

Prices submitted for the refinery’s process packages, known as packages one, two and three, were officially announced by the Central Tenders Committee (CTC) on 9 March.

The low bid on package one was submitted by a consortium of Spain’s Tecnicas Reunidas, China’s Sinopec Engineering and South Korea’s Hanwha Engineering & Construction, and came in at $1.3bn, 40 per cent more than the CTC’s estimate.

The lowest price for package two was also submitted by the Tecnicas Reunidas consortium.

Its bid of $2.8bn came in 42 per cent above the budget estimate.

The lowest price for package three was submitted by a consortium of US-based Fluor with South Korea’s Hyundai Heavy Industries and Daewoo Engineering & Construction.

Its bid of $3.3bn for package three came in more than 27 per cent above the CTC’s estimate.

Due to the size of the packages, it is unlikely that the Tecnicas Reunidas consortium will be awarded both packages one and two.

Even before the prices for packages one, two and three came in, there were concerns about the future of the New Refinery Project (NRP) after prices for the refinery’s marine package, known as package five, and its tankage package, known as package four, both came in hundreds of millions of dollars over budget.

In February, KNPC’s deputy CEO told a local newspaper that the company was considering retendering packages four and five due to the discrepancies between bidding prices and allocated budgets.

“Under CTC guidelines, if a project comes in over budget on this kind of scale it should be retendered,” says a source working for a contractor involved in the tendering process. “Ultimately however, it comes down to the client. If KNPC is happy with the prices and can find the extra budget needed to fund the project then these contracts will be awarded.”

If all the project’s unawarded packages are retendered, it will be a major setback for the country’s plans to overhaul its refining sector, slash the sulphur content in its fuels and lift its refining capacity from 930,000 barrels a day (b/d) to 1.4 million b/d by 2020.

The NRP will see a 615,000-b/d refinery constructed on a greenfield site in the Divided Zone, which is shared with Saudi Arabia, and has a long history of delays and setbacks.

Since it was first announced in 2005, the scheme has been tendered three times. It saw contracts awarded on the second occasion, but they were cancelled before construction started by the Supreme Petroleum Council (SPC), a government agency that is charged with oversight of the country’s energy sector.

Scope of package one:
Crude distillation units
Atmospheric residue desulphurisation units
Diesel hydrotreating units
Naphtha hydrotreating units
Kero hydrotreating units
Saturated gas units
A heavy oil cooling unit

Scope of package two:
Hydrogen recovery unit
Hydrogen compression unit
Hyrogen production units
Sour water stripper units
Amine regeneration units
Sulphur recovery units and tail gas treating unit
Flare 
Sulphur pelletising/conveying unit
Acid gas flare
Sulphur storage area 

Scope of package three:
Steam generation unit
Air systems
Water systems
Buildings

If contracts are awarded, the NRP will be one of the main drivers of project awards in Kuwait over 2015, with five packages worth a total of $11.5bn set to be awarded over the year.

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