Kuwait National Petroleum Co. awarded 3.48 billion dinars ($11.5 billion) in contracts to companies including Tecnicas Reunidas SA and Daewoo Engineering & Construction Co. for a project to build its long-awaited, fourth oil refinery.
The state-owned refiner, known as KNPC, awarded three packages to companies also including Hyundai Engineering & Construction Co. to build the Al-Zour oil refinery, according to the official Kuwait News Agency. The refinery’s capacity will be 700,000 to 800,000 barrels a day, up from an initially planned capacity of 615,000 barrels, Alrai newspaper reported July 21, citing Kuwait Oil Minister Ali al-Omair.
The refinery project is another move by oil producers in the Gulf Cooperation Council states to diversify their source of income by processing crude at home after suffering revenue loss from lower oil prices since last year. Demand for refined products in GCC countries is due to rise on population growth and with low cost of fuel.
“The products of al-Zour refinery will be mainly for meeting local demand in Kuwait and the Middle East as demand for refined products is slowing down in Asia,” said Essam al-Marzouq, a Kuwait-based independent analyst. “The cost of the refinery has inflated and let’s hope that current market dynamics can support the economics of the refinery.”
Brent crude, the global benchmark, lost 21 cents to $53.09 a barrel on the London-based ICE Futures Europe exchange at 12:43 p.m. Singapore time on Wednesday. The grade fell about 50 percent in the last year.
Al-Zour’s contruction has been planned since 2007, and was delayed by internal political disputes. The initial cost of the al-Zour refinery was estimated at 4 billion dinars. The government approved last week an additional 871 million dinars for the project to complete the remaining packages.
KNPC announced that a group of companies including Tecnicas Reunidas, Hanwha Engineering & Construction Corp., and China Petroleum & Chemical Corp., known as Sinopec, won a 1.28 billion dinar contract to develop the refinery’s industrial unit. Another group including Daewoo Engineering & Construction Co. and Hyundai Heavy Industries Co. won two groups of contracts valued at 1.75 billion dinars for infrastructure and support units.
The third package valued at 454 million dinars was given to a group including Hyundai Engineering and Saipem SpA to build the export terminal. KNPC expects to award more contracts for the al-Zour refinery in about two weeks, it said. The refinery will process Kuwaiti heavy crude that will come from new fields, KNPC’s Chief Executive Officer Mohammad Ghazi al-Mutairi said last year. The plant’s fuel oil will be used in the country’s power plants, he said.