Page 4 - DMEA Week 08 2023

DMEA COMMENTARY DMEA

Al-Zour chems contracting

continues as refinery ramps up

More petrochemical delays look likely at Al-Zour while integrated refining operations ramp up

KUWAIT KUWAIT’S state tendering body is reported to of the facility’s commissioning. This included
have turned down a proposed change to a group- the start-up of one of the refinery’s three 205,000
ing of bidders on the country’s key Al-Zour pet- bpd crude distillation units (CDUs) with the
WHAT: KIPIC rochemicals project, potentially further delaying intention of commissioning them fully later in
is said to be preparing work. Local media reported that a request had the year. The second and third CDUs were to be
to launch a tender for been filed with the Central Agency for Public commissioned in October and December; how-
work on the petchems Tenders (CAPT) by Kuwait Integrated Petro- ever, delays have meant that commissioning is
facility, but issues around leum Industries Co. (KIPIC) to update the list set to take place in 2023.
prequalification look set to of qualified bidders for work on the facility KIPIC, a subsidiary of state oil firm Kuwait
cause further delay. integrated with the refinery of the same name, Petroleum Corp. (KPC), was set up to over-
to reflect “changing alliances between some see the $16bn project’s implementation and to
WHY: The adjacent contractors.” manage and operate the integrated refining, pet-
Al-Zour refinery is Meanwhile, the Al-Zour refinery is set to rochemicals and new regasification terminal,
ramping up towards full boost Kuwait’s refining capacity to 1.415mn bar- LNG Import (LNGI), which has a capacity of
commissioning after years rels per day from around 800,000 bpd once fully 22mn tpy. Speaking during the Qatar Economic
of development. commissioned after a phased ramp-up. Forum in 2022, KPC CEO Sheikh Nawaf Al-Sa-
This will boost the country’s middle distillate bah said: “We’ve already worked in the com-
WHAT NEXT: output, enabling it to cater to an increasingly missioning stages. The hydrocarbons are in the
Unprecedented fuel tight market while providing more low-sulphur system. It’s a hot site now.”
shortfalls in Europe have fuel oil for local power plants and naphtha to He added that KPC has been receiving inter-
meant the refinery has feed the petrochemical plant. est from European buyers regarding refined
become a cornerstone in products ahead of Al-Zour’s launch. “We’re get-
the Middle East’s ability Chems contracting ting more calls for products … By the end of the
to meet the continent’s The CAPT rejected KIPIC’s request to alter the year, we’ll have about 615,000 bpd of oil being
demand. list of bidders just a month after US-based KBR converted into mostly diesel and very low sul-
and South Korea’s SK Engineering & Construc- phur fuel oil,” he said. “Right now, there is a tre-
tion pulled out of bidding consortia without mendously good market for fuel oil, and whether
providing any reason. The South Korean firm it’s bunker or diesel or whatnot. And we’ll use
was due to bid with UK-based Petrofac for two that. We will supply the world with that,” he told
engineering work packages. Bloomberg.
Rejection of the changes is likely to bring fur- KIPIC had set a target commissioning date
ther delays to the project, which was originally for Al-Zour of late 2020, pushing this back to
seen being completed and commissioned in 2021 – then 2022 – as restrictions relating to
2024. Covid-19 slowed progress. Several services firms
In January, CAPT was reported to have con- and contractors involved in the development of
sidered allowing Indian engineering firm Larsen Al-Zour were reported to have attempted to
& Toubro to pre-qualify as a sole bidder, and for invoke force majeure, with restrictions having
South Korea’s Hyundai E&C to replace SK Engi- made it impossible to meet deadlines.
neering & Construction. Once complete, Al-Zour will add to the
Following the completion of a commercial recent completion of the long-awaited Clean
feasibility study by UK-based Wood Mackenzie Fuels Project (CFP), with the country also hav-
in December 2022, KIPIC had been expected to ing previously spoken of plans to attain 2mn bpd
invite bids on the project in mid-2023, with an of refining capacity.
aim to have them awarded by the beginning of Al-Zour’s slate was estimated to have
2024. increased to 186,000 bpd, 106,000 bpd and
Al-Zour’s $10bn petrochemical arm is seen 36,000 bpd by the end of 2022.
producing around 2.8mn tonnes per year of pet-
rochemicals. This includes 1.4mn tpy of parax- Diesel demand
ylene (PX), 940,000 tpy of polypropylene (PP) Meanwhile, European demand for petroleum
and 420,000 tpy of gasoline. products has grown owing to the conflict in
Ukraine, and Gulf states such as Kuwait have
Refining ramp-up scrambling to meet this higher fuel demand.
KIPIC began test runs at its giant greenfield Europe has increasingly resorted to searching
Al-Zour refinery in June 2022, marking the start for alternative suppliers as Russia cuts supplies

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