The Kuwait Petroleum Corporation has requested Kuwait Integrated Petroleum Industries Company (KIPEC) to prepare a future study on marketing the Al-Zour refinery products at home and abroad, for about 25 and 35 years from now.
A local Arabic daily quoting oil sources said that the KIPIC is expected to present the practice during the coming period to a number of consulting companies specialized in studying the local market conditions in order to market the refinery products during which huge quantities of the fuel oil product that the refinery was originally built was dispensed with to provide it to the power and water plants to operate the turbines, in favor of expanding the use of natural gas, noting that the refinery project was completely changed to turn later into a transformational refinery.
With regard to the financial and economic returns of the refinery, the sources indicated that the Al-Zour project was designed on a non-profit basis as it is a strategic project aimed at meeting the needs of the Ministry of Electricity and Water for fuel oil with low sulfur content in the first place, and therefore the internal rate of return of the refinery is not measured as another profitable project.
However, in light of the developments in the global natural gas markets and the inauguration of the liquefied gas import port in Al-Zour, the Kuwait Integrated Petroleum Industries Company, in coordination with the Kuwait Petroleum Corporation, has monitored plans to raise the transformative capacity of the refinery in the medium and long term with the aim of maximizing the added value of its products and thus converting the refinery to profitability through the Al-Zour Petrochemical Project.
Regarding the delay in the implementation of the Al-Zour refinery, the sources said that the contractors implementing the project faced many challenges in the implementation, and KIPIC made unremitting efforts to follow up the works and develop appropriate solutions and plans to raise the rates of completion and make maximum efforts to coordinate with the contractors to find solutions to all obstacles and difficulties accompanying the implementation a project of this magnitude.
She added that work is underway on effective follow-up by holding periodic meetings at the highest levels with contractors’ departments, in addition to daily meetings with the project consultant to review all contractor’s work related to the project.
Regarding the losses suffered by Kuwait as a result of the delay in operating the refinery commercially, the sources said that it is not necessary that the delay in operating the Al-Zour refinery will result in losses, as during previous periods, especially the Corona pandemic period (the period that coincides with the date of the contractual operation of the refinery), oil refineries incurred global losses due to a decrease in the price margin between crude oil and petroleum products.
The sources added: “Assuming that the operation of the Al-Zour refinery took place in previous years, it is not possible to be certain that losses will be achieved, because this depends mainly on the price margin between the price of crude oil and the price of petroleum products and their competition in global markets, the refinery’s operational efficiency, as well as supply and demand for petroleum products, and to confirm these assumptions require operating the project, knowing the competitive situation, the price margin, and the operational efficiency of the refinery at the time, noting that the Al-Zour refinery is considered a strategic refinery according to the nature of its design.”
The sources indicated that the Kuwait Petroleum Corporation sells the quantities of crude oil designated for refining at the Al-Zour Refinery in the international markets until it is operational, and therefore the desired and targeted profits for the state are achieved by selling that share of oil abroad.
It is worth noting that the Al-Zour Refinery project will meet the electricity and water generating stations in Kuwait from fuel with low sulfur content, thus protecting the environment by reducing harmful emissions from power and water generating stations to reduce emissions of harmful gases and recycle industrial water by 100%.
The sources identified a number of reasons behind the delay in the construction of the Al-Zour refinery, as follows:
1 – Lack of labor in the initial phase of the project.
2 – Delays in some design work, detailed engineering and supply of critical materials and equipment.
3 – Delay in obtaining the necessary approvals from some government agencies.
4 – Unexpected bad weather conditions on the industrial island, which had a negative impact on the construction operations.
5 – The spread of the Corona pandemic in the world in general, and its impact on the project in addition to the impact of the (total/partial) ban period and the complete closure of some labor areas, which led to the difficulty of being at the work site in addition to closing the airspace and disrupting the airport, which made it impossible for the technical staff to come For contractors, supplier representatives and licensors of refinery units to the project site.