Kuwait's Al-Zour refinery gets approval

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, July 1 -- Kuwait’s Oil Minister Mohammad al-Busairy said the Supreme Petroleum Council (SPC), the country’s highest decision-making body for oil policy, has approved construction of the 615,000 b/d Al-Zour refinery.

Al-Busairy said SPC also approved proposals to upgrade two of Kuwait’s three existing refineries—the 466,000 b/d Mina Al-Ahmadi and the 270,000 b/d Mina Abdulla.

Development of the Al-Zour refinery is expected to comprise two phases. During Phase 1, the facility will process 300,000 b/d of crude for the domestic market. Under Phase 2, it will process a further 315,000 b/d of oil.

Ultimately, the refinery’s second phase will replace the distillation input of the country’s 200,000 b/d Shuaiba facility, which is Kuwait’s oldest and smallest refinery and is planned for closure.

Kuwait may seek private investors to help build the new refinery after a government council revived the $14.5 billion project, which stalled 2 years ago amid political opposition.

“There may be some requirement to give a portion of it to the private sector,” said Kuwait Oil Co. Chairman Sami al-Rushaid while in London.

Kuwaiti authorities suspended the Al-Zour refinery project in March 2009 after opposition lawmakers said the government had bypassed the law in awarding contracts to foreign firms without first going consulting Parliament’s Central Tenders committee.

Word of the Al-Zour facility coincided with an earlier statement by al-Busairy that Kuwait plans to increase its production to 4 million b/d of oil by 2020 from the current average of 2.63 million b/d.

Al-Busairy said Kuwait conducted a successful experiment in October to raise the country’s oil production, establishing an output of 3.5 million b/d.

Meanwhile, al-Busairy said the global oil market will be in “dire need” for some 2 million b/d of oil during this year’s third quarter, with demand falling to 1.5 million b/d in the year’s last quarter.

Noting that Saudi Arabia, Kuwait, and the UAE alone have the necessary spare capacity to meet the growing demand, al-Busairy said his country should take advantage of the situation while prices are high.

"We should not miss such opportunity, particularly under the soaring prices, and the increasing demand in the market, and we have the ability to meet such demand," al-Busairy said, adding, “This is an output policy in the interest of our country, and we are following it.”

Al-Busairy’s remarks are an indirect rebuttal to recent claims by Iran that increased output is contrary to market needs. Kuwait supported the proposal by Saudi Arabia to increase output at the June 8 meeting of the Organization of the Petroleum Exporting Countries in Vienna.

At the time, Iran claimed that the proposal to boost output was the result of undue political pressure on gulf producers and not on market fundamentals. Iran repeated its claims following the recent decision by the International Energy Agency to release 60 million bbl of oil over 30 days.

Contact Eric Watkins at hippalus@yahoo.com.

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