Kuwait's Oil Minister confirmed yesterday that Fluor Daniel and Korea's Sunkyong will rebuild Kuwait's Ahmadi refinery under an intial cost of $298 million agreed to with the plant's insurance firm.

Sheikh Saud Nasser Al Sabah told Reuters that Kuwait also plans to upgrade the 450,000 barrel per day refinery in the rebuilding process. "I am not speaking about capacity but about technology used in the refining units," he added.

Executives had told Reuters on Saturday that Swiss insurance firm Robertson and Co SA agreed with the two contractors on the repair work at the plant which was shutdown in June when a huge explosion killed six people.

Sheikh Saud said actual repair work could start in two months time. Mina Al Ahmadi refinery is run by state-owned Kuwait National Petroleum Co (KNPC) which is due to pick a project management consultant (PMC) after a tender closed last month with four groups in the running.

"The PMC winner will look after KNPC's interests in the repair work but the insurance firm is the one in charge of rebuilding and awarding the work," one exective said on Saturday. Kellog Brown and Root, Foster Wheeler, Bechtel and Parsons bid for the PMC tender.

"Once KNPC and the insurance agree on all the work and costs, KNPC can then step in and pay the contractors additional funds if it decides to upgrade Ahmadi as opposed to restoring it to its previous status.

"There have been some technological advancements in this field and KNPC could opt to upgrade but they pay for it," added the industry executive. KNPC is part of Kuwait Petroleum Corp (KPC) which is headed by Sheikh Saud.

The repair work is not expected to start before a couple of months, with the first unit coming onstream in 10 months and the entire plant in 28 months, executives earlier said. In mid-October, Ahmadi refinery, valued in a new insurance policy at some $4 billion, started operating one of three crude units (CDUs) at a rate of around 200,000 bpd. One of the two other CDUs suffered extensive damage.

Kuwait had originally said the repair work at Ahmadi could cost about $330 million. KNPC runs the Opec member's three domestic refineries which are key products exporters mainly to Asian markets.

Two people were killed in another explosion in June at Kuwait's 195,000 bpd Shuaiba refinery. Production was not affected by the blast. Kuwait's third domestic refinery of Mina Abdullah has a capacity of around 265,000 bpd.