Kuwait in $35bn oil upgrade

Twenty years after Saddam Hussein's Iraqi army occupied Kuwait , the two countries agreed to share oil from cross-border fields.

KUWAIT CITY // Kuwait is about to embark on major oil projects worth almost US$35 billion (Dh128.45bn) as part of the government's four-year development plan, says Sheikh Ahmed Abdullah Al Sabah, the oil minister. The investments include a fourth refinery, a project that has stalled before in the country's parliament.

"There's big money involved," Sheikh Ahmed, who is also the chairman of Kuwait Petroleum Corporation (KPC), told The National. Kuwait also plans to upgrade and boost capacity at the country's existing facilities under an initiative known as the Clean Fuels Project. The fourth refinery had been planned for construction at Al Zour but the government cancelled it in March last year under pressure from members of parliament.

That facility was to process 615,000 barrels per day (bpd) of oil, but MPs criticised the contract awards procedure and rising costs. The new refinery is designed for high-sulphur oil, Sheikh Ahmed said. "The purpose of this refinery is to produce the special fuel for our electricity, because in the international market there is not enough gas fuel for our electricity plants." The Clean Fuels Project for Kuwait National Petroleum Company, KPC's refining arm, will increase the capacity of the country's existing refineries and enable them to produce lighter fuel.

A lack of investment has left the country's three oil refineries seriously in need of an overhaul. The project is expected to boost the combined capacity of two of Kuwait's three existing refineries, at Mina Abdullah and Mina Al Ahmadi, from about 730,000 bpd to 800,000 bpd. Sheikh Ahmed said the two major projects would be operational in "not less than four to five years". Khaled Mahdi, an assistant professor at Kuwait University's department of chemical engineering, said none of Kuwait's existing refineries produce the almost sulphur-free fuel that is desired by importers in Europe, Asia and the US.

"Everyone who is importing wants to go as low-sulphur as possible" to meet stringent environmental regulations, Mr Mahdi said. Kuwait's environment is suffering from the combustion of heavy oil in local power stations, and the government's environmental protection agency is putting pressure on the refineries to produce cleaner fuel, he said. "The Clean Fuels Project is not a project; it's a huge programme," Mr Mahdi said, adding that KNPC had assembled many of the elements needed before building could begin.

"They have the design, the land in Al Zour and the equipment is already there," he said. "They've trained so many KNPC personnel - they just need to kick off." Kuwaiti graduates from the chemical engineering department at Kuwait University have been snapped up by the expanding oil industry within a month of graduating for the past three years, Mr Mahdi said. "They take them like hot cakes - the good and the bad."

The new projects could provide a much-needed boost to Kuwait's oil sector as its northern neighbour Iraq is also trying to expand its capacity to a level that will make it one of the world's major producers. Sheikh Ahmed said the Kuwaiti government was keeping an eye on developments in Baghdad. "We are watching very closely, but we don't interfere in their internal affairs," he said. "Whatever they decide, they decide."

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