Kuwait gives green light to $14.5bn Al Zour refinery

Mega-project stalled two years ago following political opposition to contract wins
Kuwait gives green light to $14.5bn Al Zour refinery
On completion, the Al Zour refinery will be Kuwaits largest
By Bloomberg
Tue 28 Jun 2011 03:09 PM

Kuwait moved a step closer to building the nation’s largest
refinery at a cost of at least KD4bn ($14.5bn), reviving a project that stalled
two years ago following political opposition.

The Supreme Petroleum Council, the emirate’s highest
decision-making body for oil policy, approved construction of the 615,000
barrel-a-day Al Zour facility, Oil Minister Mohammad Al Busairy said Tuesday.

The approval is “a very big step,” Al Busairy said in a
telephone interview in Kuwait City. “We now have to follow all legal procedures
to implement the project.”

The council approved the Al Zour refinery yesterday, along
with a project to upgrade two of the country’s three existing refineries, Mina
Al Ahmadi and Mina Abdulla, so that they can produce cleaner-burning fuels, the
minister said.

The Al Zour project would be the Gulf nation’s biggest oil
refinery. The government suspended the project in March 2009 in the face of
political opposition after the emirate signed letters of intent with foreign

Opposition lawmakers said at the time that the government
had circumvented the law in awarding the contracts without going through the
Central Tenders Committee.

 “I don’t expect
anything will go ahead this year in Kuwait because the political situation is
so unstable,” Thad Malesa, an independent energy analyst, said by telephone
from Dubai. “Parliament will drag things out, frustrating any partners.”

Past disputes between Kuwait’s legislative and executive branches
have led to government resignations and halted other projects. Lawmakers’
objections contributed to the scrapping of a joint venture with Midland,
Michigan-based Dow Chemical Co, in December 2008.

Kuwait awarded construction contracts for the Al Zour refinery
in May 2008 to JGC Corp of Japan and to South Korea’s GS Engineering &
Construction Corp, SK Engineering & Construction Co, Daelim Industrial Co.
and Hyundai Engineering & Construction Co.

Fluor Corp, based in Irving, Texas, won a consulting
contract. The initial plan called for the refinery to start operating by 2012.

The facility may be formed as a public shareholding company
to expand the role of private investors in the country’s economic development,
the state news agency KUNA reported last July, citing the former minister for
development, Sheikh Ahmad Al Fahad Al Sabah.

Kuwait is the fifth-biggest producer in the Organization of
Petroleum Exporting Countries, pumping 2.425 million barrels of oil a day in
May. The country’s current refining capacity is 930,000 barrels a day.


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