• Prices for the refinery contracts have come in $4.2bn over budget
  • Officials are considering retendering packages
  • Study on petrochemical integration is ongoing
  • Final decision on retendering may be delayed while officials wait for study results

The final decision on whether or not to retender the Al-Zour refinery project will take at least a month, according to a senior Kuwait National Petroleum Company (KNPC) official.

“The view of the committee is that it is better to take a long time, rather than make a decision quickly without considering all of the options fully,” he said. “I am not expecting a decision for one month at least.”

Prices submitted for the refinery’s six unawarded packages have come in $4.2bn over budget, stoking concerns the multibillion-dollar scheme may be re-tendered for a third time.

“The total refinery has gone over budget by around 30 per cent. The perception amongst the high-level KNPC committee discussing this is that the prices are unacceptable,” the official said.

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Kuwait Al-Zour refinery

The consultancy KBC Advanced Technologies is currently undertaking a study looking at the feasibility of integrating a petrochemical facility with the refinery, something that could improve margins and make the project more likely to go ahead.

“We may see a final decision on the project delayed until after the study conducted by KBC comes back,” the official said. “If it shows that integration will bring significant savings then the higher bid prices may be considered justifiable.”

KNPC is currently carrying out meetings with the consortiums of engineering, procurement and construction (EPC) companies that submitted prices for the project’s packages.

It’s thought that the possible negotiation of lower prices will be high on the agenda.

If a deal for lower prices cannot be agreed and some of the project 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 Al-Zour New Refinery Project 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 twice. 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.

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