The Kuwait National Petroleum Co. (KNPC) is finally taking a quantum leap in the development and upgrade of its refineries. The recent announcement of $12 billion worth of contracts for clean fuels projects at the Mina Abdullah and Al Ahmadi refineries was much awaited as part of Kuwait’s economic development plans.

The project had been on the drawing board for some time but differences between the parliament and the government delayed it, as also the one for a 615,000 barrels a day Al Zour refinery, which may now be awarded shortly.

The clean fuels project at the two refineries involves the construction of 19 process units and the revamp of another five to essentially reduce the sulphur level in the products to meet environmental objectives and allow the flow of Kuwait’s products to international markets, which are increasingly demanding clean fuels.

The announcement does not specify to which extent sulphur in the products will be reduced but judging by the huge capital investment, I expect that the diesel and gasoline sulphur level will be reduced to 10-50 parts per million — the level desired by advanced markets and even emerging markets in Asia moving in that direction.

Therefore, the hydro-treating capacity at the two refineries is not only expected to increase substantially but modern technology and new catalysts are expected to be employed to achieve the objective of reducing sulphur. Because Kuwait consumes large volumes of fuel oil in power generation and to protect its environment and preserve its structures and equipment, the fuel oil sulphur level will be reduced to 1 per cent maximum, which is also the level demanded by export markets. Even the shipping industry is mandated to use this fuel oil shortly.

The refining capacity at the two refineries is 730,000 barrels a day but the revamp will raise the capacity to 800,000 barrels a day and connect the two plants and Shuaiba refinery with transfer pipelines to exchange intermediate and final products. This would increase the flexibility and productivity of the overall refining structure.

 

Domestic consumption

Oil production in Kuwait is close to 2.8 million barrels a day, where just under a third of that is refined locally. But the domestic petroleum products consumption is about 260,000 barrels a day and, therefore, the greater portion of refinery products are exported to international markets.

This point alone is sufficient reason for Kuwait to upgrade its refineries to meet the demanded product specifications for the export markets. The upgrading projects while announced recently, KNPC is expected to finalise and sign the contracts in a few weeks and construction may start in April. Due to the extent of the project and its complexity, completion is expected to take five years though some parts may be completed before others.

The second mega-project of the “state-of-the-art” 615,000 barrels a day Al Zour refinery is expected to be awarded shortly, which will complete the refinery investment programme in the Gulf state for a long time to come. This project had been delayed for almost five years for political reasons.

It is expected to be more complex and may even produce more stringent specification products. The whole programme may raise Kuwait refining capacity to 1.615 million barrels a day until the old Shuaiba refinery of 200,000 barrels a day is finally closed. Kuwait may decide to extend the life of Shuaiba refinery depending on the market at that time.

One point worth considering by Kuwait regards the power supply to its refineries. A few weeks ago the three refineries suffered a complete shutdown due to power failure. For this to happen I assume that the refineries are fed by electricity from the national grid or from one dedicated power station.

Kuwait is well advised to segregate the power system of the refineries, which are large enough to justify their own power generation facilities that may well be integrated with the refinery utilities system efficiently.

Kuwait owes it to the region to make more details and breakdowns about this important project publicly available so that planners and decision-makers may be guided by the new experience. This is especially important at this time of rising project costs worldwide.

 

— The writer is former head of the Energy Studies Department at the Opec Secretariat in Vienna.