Kuwait struggles

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Kuwait's main oil refinery at Mina al-Ahmady. (Getty Images)

Can the country's downstream sector push on in the face of troublesome roadblocks? Petrochemicals Middle East investigates.

Kuwait is once again struggling to move forward with plans to upgrade its refining sector. It is faced with roadblocks on the path to setting up the world's third largest standalone refinery, and upgrade the three existing facilities that are one of the oldest in the region.

New refining capacity is needed to absorb enhanced oil production but state-owned oil companies are faced with shortages of labour, materials and equipment, as well as controversy over the award of contracts worth more than $9 billion for the construction of the new 615 000 bpd refinery at Al-Zour.

The projects are necessary to process additional oil production capacity, which is set to rise to 3 million barrels a day (bpd) by the end of 2008 or in early 2009.

Industry officials say that due to delays upgrade costs could reach up to $40 billion and officials at Kuwait National Petroleum Company (KNPC), which is responsible for the refining sector, could face a major challenge in sourcing the more than 100,000 workers required for the refinery upgrade projects.

"The regional market has too many new and upgrade projects at present. There are refinery projects worth more than $60 billion in the design or implementation stages in Saudi, the UAE, Kuwait and Qatar. Contractors have their hands full, and the leading consultants are busy juggling around the existing work on their books. Delays are inevitable, there is not much anyone can do about it," says a consultant working with a leading international firm active in the region.

Work on the 615 000 bpd Al-Zour refinery is now expected to start next year. Cost of the project has already risen beyond $15 billion from $6.3 billion two years ago. KNPC has awarded contracts worth more than $9 billion but work has still not started, and an ongoing debate in the parliament over the legitimacy and transparency of contract awards could cause further delays.

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