KPC: Global demand softens effect of Japan crisis on Kuwait

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Apr. 21 -- Current levels of global demand for oil would buffer the impacts of Japan’s nuclear crisis on Kuwait, according to Abdelatif Al-Houti, Kuwait Petroleum Corp. (KPC) managing director for world marketing.

Al-Houti told state media that the protests and unrest in Libya, as well as in Bahrain, have led to high oil prices, but that the crisis in Japan has created some price balance due to its reduced consumption of oil.

In any case, he said, the reduced consumption in Japan has no effect in Kuwait, which exports no products to the Far Eastern nation.

However, the prices of oil and gas products, especially auto fuel, will skyrocket due to the stoppage of several world oil refineries for maintenance, said Al-Houti, who added that Kuwait sells only to end users and not to speculators.

Kuwait currently markets oil ranging between 2.2-2.3 million b/d, which is the country's quota within the Organization of Petroleum Exporting Countries, he said.

Al-Houti said 80% of Kuwait’s oil goes to East Asian markets including South Korea, Taiwan, Japan, China, and India, that 15% is exported to the US, and that the remaining 5% goes to markets in Europe.

However, the need for energy in Kuwait is rising as a result of the country’s growing demand for electricity, which has risen more than 50% over the past decade, now standing at 12,500 Mw from 8,000 Mw in 2000.

Al-Houti noted that until 2013, Kuwait plans to import LNG during the summer months in order to meet the needs of the Ministry of Electricity, but that KPC’s planning sector also is studying the possibility of long-term imports of natural gas—in addition to possible new refining capacity in the country.

Kuwait’s Supreme Petroleum Council, the country’s highest decision-making body for oil policy, must this year give its approval for the long-planned 615,000 b/d Al Zour facility, according to officials.

The government suspended the Al Zour project in March 2009 after political opposition, and Kuwait National Petroleum Co. is seeking approval to resume it, with plans to have the facility online by 2016.

The refinery may cost about 4 billion Kuwaiti dinars ($13.7 billion), according to KNPC Deputy Chairman Asa’ad Al-Saad.

Meanwhile, Al-Houti unveiled a plan for 2020-30 to promote Kuwaiti oil in China, which has a growing need for crude due to its large population and “remarkable industrial advancement.”

Negotiations with China for construction of a 300,000 b/d oil refinery began in 2004, said Al-Houti, who noted that Kuwait’s exports to China now reach 250,000 b/d—well up from the 20,000 b/d exported in the mid-1990s.

When the new Chinese refinery comes online, its output will be consumed entirely in China which, he said, “badly needs oil derivatives, particularly in Guangdong province where the refinery is being constructed.”

The Chinese unit fits into plans by Kuwait Petroleum International, the foreign operations unit of KPC, to boost its overseas refining capacity to 800,000 b/d this decade.

In addition to the 300,000 b/d refinery venture with Sinopec, KPI also is working on a 200,000 b/d facility with Petrovietnam which should online by 2014. KPI also is also studying the feasibility of a 300,000 b/d refinery to be constructed in Indonesia, with a start-up date in 2017.

Al-Houti’s remarks about the refinery in China followed earlier reports that Kuwait is in talks with BP PLC and other international oil companies over a possible role in its $9 billion refining joint venture with Sinopec in China.

Mohammed Jasem, KPI vice-president and chief planning officer, last week told reporters that Kuwait hoped to conclude the partner selection process by May.

"We are not at the final stage. Along with BP, there are others," Jassem said. "The door is open for whoever is potentially interested."

Last month, Beijing approved the $9 billion refinery and petrochemical project which is comprised of the 300,000 b/d refinery along with a 1 million tone/year ethylene cracker.

Kuwait and Sinopec are equal partners in the project, and a third partner would be expected to bring financing to the project.

Officials also said Kuwait could reach an agreement with ExxonMobil Corp. this summer to develop heavy crude deposits in the country’s northern region.

Hashim el-Refaai, KPC managing director for planning, said his country is still in talks with the US company and may sign an accord if the talks are successful.

“It is a big area with many reserves, so there can be room for more than one company in the north,” said Refaai, who mentioned that Total SA is also interested in developing heavy oil in northern Kuwait.

KPC expects to invest $90 billion over 5 years in refineries, ships, and drilling, el-Refaai said.

Kuwait currently holds about 8% of the world’s crude reserves and aims to boost its production capacity to 3.5 million b/d by 2015, rising to 4 million b/d by 2020 and remaining there until around 2030, according to plans announced by the government.

Contact Eric Watkins at hippalus@yahoo.com.

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