Global Arab Network | Kuwait increasing oil refining capacity up to 50%

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Kuwait increasing oil refining capacity up to 50%

Tuesday, 29 March 2011 11:38

Investor confidence in Kuwait’s energy industry should get a welcome fillip from reports that the state-owned oil company is set to increase domestic oil refining capacity by more than 50% over the next five years, Global Arab Network reports according to OBG.

Farouq Al Zanki, the CEO of Kuwait Petroleum Corporation (KPC), told a conference in the US on March 9 that Kuwait plans to build a refinery with the capacity to process 615,000 barrels per day (bpd). This followed a statement in late 2010 from the chairman of Kuwait Oil Company (KOC), Sami Al Rasheed, who said the country had raised its production capacity to around 3.3m bpd, but that it aimed to reach a target of 4m bpd by 2020. With reserves of some 104bn barrels and 63trn cu feet of gas, Kuwait is currently the fifth-largest producer in OPEC, behind Saudi Arabia, Iran, Iraq and the UAE.

Kuwait is also planning to build two olefins plants as part of a $270bn development of projects to be completed over the next 20 years. Of that investment, $81bn is allocated for the next five years and is to be split evenly between production, refining and distribution, Al Zanki said at the CERAWeek energy conference. He also predicted that two-thirds of the world’s energy demand will come from Asia by 2030.

Khaled Al Mushaileh, an official from Kuwait National Petroleum Company (KNPC), said in October 2010 that the government would promote new refinery ventures and upgrade facilities already in operation to boost refining capacity to 1.4m bpd. There are currently three refineries in Kuwait – Mina Abdulla, Mina Ahmadi and Shuaiba – with KNPC serving as the refining arm of KPC.

Historically, Kuwait has relied on its abundant reserves of light crude oil (crude with a low viscosity, which requires less-intensive refining) to serve its petroleum industry. Burgan field, the second-largest in the world after Saudi Arabia’s Ghawar field, produces 1.7m bpd of light crude and has been the mainstay of Kuwait’s oil production since the 1940s.

While various reports had previously stated that the Burgan field was maturing and unable to sustain greater production rates, late last year KOC revealed that it had indentified further crude reserves equivalent to 12bn barrels at Burgan. The field’s reserves were “much higher” than previously announced, the state news agency KUNA reported in April 2011, citing the deputy prime minister for economic affairs, Sheikh Ahmad Al Fahad Al Sabah.

In a sign of the Kuwaiti energy industry’s rising confidence, days after Al Zanki’s announcement on capacity the KPC and China Petroleum and Chemical Corporation (Sinopec) revealed that a $9bn refinery complex will be built on China’s Donghai Island, near Zhanjiang City in Guangdong Province, as a joint venture.

The new refinery is expected to be operational from 2014-15. It will process 100% Kuwaiti crude oil, supplied by KPC, with a refining capacity of 300,000 bpd, equivalent to 15m tonnes per annum. In addition, the ethylene cracker unit will have an annual production capacity of 1m tonnes. “This important achievement is the result of close cooperation between the Chinese and Kuwaiti governments,” Hussain Esmaiel, the president of KPC’s international downstream marketing unit, told reporters at the signing ceremony.

With the recent discovery of additional reserves, a raft of refining deals at home and abroad, and sustained high prices for oil on international markets, the fundamentals are in place for Kuwait’s energy industry to profit handsomely in 2011, with this likely to have a range of positive knock-on effects for the wider economy as well.

Global Arab Network

This article is published in partnership with Oxford Business Group

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Last Updated on Wednesday, 30 March 2011 14:38

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