Kuwait cancels planned fourth refinery at Al Jour

Kuwait Prime Minister Sheikh Nasser Mohammad al-Ahmad al-Sabah reported that the country has canceled plans to build a 630,000 b/d fourth refinery at Al Jour on the Persian Gulf coast near the Saudi Arabia border.

By OGJ editors
HOUSTON, Mar. 23 -- Kuwait Prime Minister Sheikh Nasser Mohammad al-Ahmad al-Sabah reported that the country has canceled plans to build a 630,000 b/d fourth refinery at Al Jour on the Persian Gulf coast near the Saudi Arabia border. He said an Audit Bureau study deemed the project unfeasible.

The refinery, earlier expected to cost $10 billion but later raised to $15 billion and rebid, had been scheduled to start in 2013 (OGJ, Nov. 12, 2007, p. 32).

Work on the grassroots refinery, which would have produced low-sulfur fuel oil for the country's power plants, was officially halted at the council of ministers' Mar. 23 meeting after contractors had been notified.

Kuwait National Petroleum Co. had awarded engineering, procurement, and construction contracts in May 2008 to four South Korean companies and a Japanese firm. Fluor Corp. was project manager and front-end engineering and design consultant, and Foster Wheeler was the feasibility study consultant. Fluor said it was notified Mar. 20 of its contract cancellation. It will reassign the 300 engineers working on the project.

The other contractors notified included Hyundai Engineering & Construction, which had a contract for $1.12 billion for offshore facilities; a consortium of Japan's JGC Corp. and Korea's GS Engineering & Construction, $4 billion for main unit construction; Daelim Industrial, $1.184 billion; and SK Engineering & Construction, $2.06 billion. GS Engineering was to have provided equipment.

The project was referred to the Audit Bureau for investigation in August following allegations by opposition members of Parliament (MPs) that the bidding process was flawed and that the contracts should have been awarded through the state-run Central Tenders Committee (CTC) to ensure transparency.

The outcome of their report was not published, but local media and MPs said the bureau concluded that the project was "technically and economically not feasible" and that future such project tenders should go through the CTC.

This is the second refinery proposal the country has scrapped in 4 months. In December, Kuwait dropped plans for a $7.5-billion partnership with US Dow Chemical after pressure from MPs, which cited "high cost amid the global economic downturn."

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