Kuwait plots worldwide downstream growth
Thursday, Jul 27, 2017
The overseas refining and petrochemical arms of state energy conglomerate Kuwait Petroleum Corp. (KPC) in mid-July both signalled plans for a new push towards international expansion.

Kuwait Petroleum International (KPI) pledged to more than treble global refining capacity by the end of the decade – with the doubts induced by a history of vague unconsummated Asian tie-ups mitigated somewhat by a recent regional investment rapidly progressing towards finalisation.

Meanwhile, chemicals counterpart Petrochemical Industries Co. (PIC) swiftly followed the agreement two months ago on the terms of a joint venture (JV) project in Canada with the award of a major contract on the multi-billion dollar development.

KPI is planning to increase global refining output to 800,000 bpd by the end of the decade and to 1.3 million bpd by 2030, CEO Bakheet al-Rashidi said during an interview on July 12 on the sidelines of the World Petroleum Congress in Istanbul.

Such extravagant projections naturally provoke scepticism – especially when delivered alongside reiteration of the long-standing and increasingly improbable KPC target of raising crude oil capacity to 4 million bpd within three years, from 3.1 million bpd at present.

KPI has signed provisional agreements since the turn of the decade to invest in Chinese, Indian and Indonesian refineries – none of which have come to fruition – while the company’s only realised investment, in a refining project in Vietnam, has suffered delays.

The start-up date of the 200,000 bpd, US$7.5 billion greenfield Nghi Son facility – in which KPI owns a 35.1% stake alongside Hanoi-owned PetroVietnam and two Japanese investors – was put back again in mid-May from the third quarter of this year to 2018 on account of technical problems.

However, the firm in April signed a JV agreement that had been provisionally sealed only five months previously with Muscat-owned Oman Oil Co. (OOC) to take a 50% stake in an estimated US$7 billion, 230,000 bpd refinery planned at the sultanate’s new economic hub at Duqm on the central coast.

Financial close and main contract awards remain pending – reportedly over discussions on potential amendment to the 50:50 equity share.
The terms of the OOC deal stating that Kuwait would supply at least 65% of crude feedstock were a requirement that Al-Rashidi revealed would apply across the board of any new refinery investments by the firm.

Despite the anomalous regional foray, KPI’s CEO also confirmed that the company’s focus would remain on fast-growing Asian markets – with China, India and Indonesia restated as targets and the Philippines also mentioned.

Earlier in the year, the Philippines’ largest refiner, privately owned Petron mooted the possibility of inviting KPC or GCC counterpart Saudi Aramco – the Asian forays of which have thus far been considerably more successful – to invest in a planned US$10 billion, 250,000 bpd refinery in the south of the country.

Opportunities remain open under Indonesia’s slow-moving Refinery Development Masterplan programme of downstream expansion – with state-owned Pertamina still seeking a partner for a grassroots facility planned at Bontang in East Kalimantan after inviting proposals from prospective investors in February.

KPC pledged to conduct a joint feasibility study on the scheme in 2010 but progress stalled and Aramco has more recently been mentioned in connection with the project.

Plans dating back nearly two decades and revived earlier this decade for KPC to invest in a refinery in India’s Odisha State alongside New Delhi-owned India Oil Corp. (IOC) appear to have been permanently scuppered by internal quarrels over tax incentives from the Indian state authorities.

However, KPI has singled out the country several times in recent months as a particular target in light of fast-growing consumption of both crude and refined products, while India’s various downstream parastatals have mooted seeking foreign investment to develop several projects across the country.

Meanwhile, PIC’s long-standing plan for international expansion – especially in North America, in order to take advantage of the plentiful supplies of cheap gas feedstock lacking at home – came closer to realisation through an agreement in mid-May with Canadian midstream specialist Pembina Pipeline to establish a 50:50 JV.

Called Canada Kuwait Petrochemical Corp. (CKPC), the firm will develop an integrated propylene dehydrogenation (PDH)/polypropylene plant near Edmonton in Alberta Province. The facility has a provisionally planned capacity of around 540,000 tpy and at a cost of US$3.8-4.2 billion.

The two firms first mooted the scheme in early 2015 and the timetable has slipped by around a year from an original plan, which had envisaged completion of the front-end engineering and design (FEED) study and a final investment decision (FID) by the middle of this year.

However, renewed progress was evident in early July as CKPC awarded Honeywell, a subsidiary of the US’ UOP, a technology supply and process design contract for the facility.

An updated timeline has projected completion of the FEED in late 2018 and the FID sometime thereafter. PIC has an existing manufacturing presence in Canada in the form three ethylene glycol plants operated by MEGlobal – owned since 2015 by the EQUATE Petrochemical JV led by the Kuwait parastatal and the US’ Dow Chemical – which early last year launched a project to develop a greenfield monoethylene glycol plant in Texas.

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