KUWAIT – Kuwait National Petroleum Company (KNPC) said it is going ahead with its long-delayed plan to build the Middle East's largest oil refinery despite political tensions that have stalled many economic development plans. The government expects to announce next month the winner of the Al-Zour refinery's project management and consultancy (PMC) contract, a senior executive at KNPC told Reuters. "The bids have been submitted and now we are in the evaluation phase... I expect the result to be out in August," the executive, who declined to be named under briefing rules, told Reuters. Five international engineering firms submitted bids for the PMC contract, industry sources told Reuters - US-based Foster Wheeler and Fluor Corp., Australia's WorleyParsons, France's Technip and British-based Amec. A spokesman for KNPC declined to comment on the names of the bidders or the size of the contract. Other contractors are due to prequalify by August 7 in order to bid for the project's engineering, procurement and construction (EPC) contracts, the industry sources said. If it goes ahead, the Al-Zour project could have an impact well beyond its monetary value, helping to restore confidence in Kuwait's economic management and the government's ability to get things done. Originally planned a decade ago, the project, which aims to provide fuel for power generation and water desalination facilities and export any excess, is estimated to cost around $14.5bn. The refinery would process 615,000 barrels per day, coming online in 2018; it would exceed the capacity of the Middle East's largest refinery, Saudi Arabia's 550,000 bpd Ras Tanura plant. But Al-Zour and many other plans have been held up by years of conflict between the cabinet, which is chosen by a prime minister who is appointed by the emir, and the National Assembly over allegations of corruption and mismanagement. Kuwait has seen eight governments come and go in just six years, blocking or delaying the passage of economic legislation and disrupting decision-making. The Al-Zour refinery project was originally awarded in 2008 to companies including South Korea's GS Engineering & Construction and Japan's JGC Corp. But in 2009 the cabinet decided to halt the project on the grounds that oil prices were then too low to finance oil projects, industry sources said; the government is now retendering for it. Announcing a surprise 42 percent drop in second-quarter profit last week, Ibrahim Dabdoub, chief executive of National Bank of Kuwait, the country's biggest bank, blamed the political turmoil for restricting state spending and delaying tenders for infrastructure projects. Independent Kuwaiti oil analyst Kamel Al Harami said the Al-Zour refinery plan no longer needed to be approved by parliament because it had been designated a top infrastructure project; it is being supervised by the state audit bureau, meaning it can theoretically go ahead without political interference, he said. He added that the project would help relieve Kuwait of the need to import cargoes of liquefied natural gas to meet excess demand for power generation during the hot summer months. But Harami said he still doubted the project would be completed on time. "I'm not optimistic - no one including the current oil minister has laid out a plan and milestones for this project, and without that it'll never be complete," he said. "The current oil minister is worried he won't be in the new cabinet and there is no one to plan this project now." Hani Hussein, a former chief executive officer of Kuwait Petroleum Corp, was reappointed as oil minister this month. But under the constitution, the cabinet will have to resign after the parliamentary elections and a new cabinet will be formed. One plan that appears stalled by political frictions is the Al Zour independent water and power project (IWPP), which is separate from the refinery project. Its fate may not become clear at least until after the elections. The public-private partnership, funded and operated jointly by the government and private companies, is to build a 1,500 megawatt power plant and a desalination plant with a capacity of between 102 million and 107 million gallons per day. It would start commercial operations in May 2015. Earlier this year, Japanese trading house Sumitomo and Europe's International Power Plc said they had together been named preferred bidders for the project. "But last month the National Assembly said they wanted to halt the project because the bidding process wasn't fair, as not all companies were present to submit the bids," said an industry source close to the project. Now with a new cabinet formed and which might be dissolved, this project is in a controversial state, as many economic projects are in Kuwait." – Reuters
