Upgrading the state’s refineries to improve quality and boost exports

Following shutdowns caused by power shortages in early 2014, Kuwait’s refineries are poised to undergo improvements in the year via multibillion-dollar upgrades and new facilities led by the private sector, including construction of the world’s largest oil refinery, which will substantially boost both exports and revenues. At the same time, refined products will soon be cleaner and of higher quality, with the Clean Fuels Project slated to improve export quality and reduce the environmental impact of domestic petrochemicals activities.

Current Capacity

Although a series of delays had slowed progress on the refinery projects, 2014 appears to be a turning point for the industry, with the oil industry leadership now moving quickly to break ground and commence work, helping ensure that exports will keep pace with the ambitious 2020 crude production targets. The US Energy Information Administration (EIA) reports that Kuwait’s refining capacity stood at 936,000 barrels per day (bpd) in 2013, the third-largest capacity in the Middle East. Kuwait refines about a third of its current crude production, and exports around 660,000 bpd, according to OPEC, with activities carried out at three major refineries: Mina Abdullah, Mina Al Ahmadi and Shuaiba. With production capacity of 460,000 bpd, Mina Al Ahmadi is the largest of Kuwait’s refineries, followed by Mina Abdullah, with 270,000 bpd and Shuaiba, with 200,000 bpd. All three are owned and operated by the Kuwait National Petroleum Company (KNPC), and located on the coastline just south of Kuwait City. Kuwait Export is a blend of Burgan crude and the heavier, sour crude from northern fields, in addition to minor quantities from Minagish and Umm Gudair, and has an American Petroleum Institute gravity of 31.4°. Kuwait Export is generally considered sour, with a sulphur content of 2.52%, according to the EIA.

Starting Works

Refinery development has been a growing priority for the sector, as increasingly outdated facilities have raised concerns about the sustainability of refining and export capacity. The KNPC has been moving to expand and upgrade its refineries as a result, with a total of 26 approved projects listed as completed or in progress as of the 2012/13 fiscal year, including refinery upgrades and construction of a new facility under the Clean Fuels Project, as well as construction of a gas plant train, a liquefied petroleum gas (LPG) train, an LPG farm, an acid gas removal unit and long-term liquefied natural gas (LNG) import facilities.

Clean Fuels Project

Recognising the negative environmental impacts of high-sulphur crude production, the government enacted the Clean Fuels Project in June 2011, a $31bn investment that aims to produce cleaner-burning fuels, including varieties with sulphur content of less than 10 parts perm, as well as Euro IV fuel, a low-emissions diesel petrol that complies with European emissions control standards. The programme will see significant upgrade and expansion of Mina Abdullah and Mina Al Ahmadi, as well as the construction of a new refinery in Al Zour, which should be completed in 2018. The planned $14.5bn Al Zour refinery, with an expected capacity of 615,000 bpd, will allow the government to close the ageing Shuaiba facility, while helping to meet domestic demand and export of ultra-low-sulphur products including diesel, kerosene and petrochemicals feedstock. Once completed, Al Zour will be the largest refinery in the Middle East.

A crude distillation unit will be taken out of commission at the Mina Al Ahmadi, while Mina Abdullah will lose a number of components, but its overall capacity will increase by 184,000 bpd, with the country’s total production capacity expected to rise to 1.42m bpd when the project is completed. The government had previously moved to construct the new Al Zour refinery, awarding $8.4bn in contracts in 2008, but political opposition led to the project’s cancellation, despite the fact that US firm Fluor had already begun work on the refinery’s utilities and offsites, with $2.1bn still remaining in its contract with the KNPC. This, coupled with an abandoned $17.4bn joint venture between Kuwait’s Petrochemical Industries Company and Dow Chemical Company in 2008, had a negative impact on the country’s reputation among international petrochemicals companies. “If you look at Dow, that deal wound up going to Saudi Arabia after it fell apart in Kuwait, which was painful for us. It’s challenging for companies when they deal with technical specialists to plan the projects, then learn that ultimately it is parliament, not us, that has final say in the decision. We hear about this challenge every day,” Mazin Nayef, technical professional specialist at the Kuwait Oil Company’s (KOC) electrical division, told OBG. The entire Al Zour refinery project was placed on hold until 2012, when the KNPC received final approval. However, after changes in leadership at the Ministry of Oil, KPC and its subsidiaries, 2014 looks bright for the Clean Fuels Project.


Kuwait awarded Foster Wheeler a $500m management and service contract for the Clean Fuels Project in December 2012, and in February 2014 the Kuwaiti government announced it had approved bids worth a total of $12bn for significant upgrade projects at two refineries. Japan’s JGC Corporation led a consortium to launch a successful bid for KD1.36bn ($4.8bn) of work at the Mina Al Ahmadi refinery, while the UK’s Petrofac entered into a joint venture with Samsung and CB&I, successfully bidding on a KD1.07bn ($3.8bn) contract to upgrade the Mina Abdullah and Shuaiba refineries. The contract includes provision of 19 new refining units at Mina Abdullah, as well as the revamping of five existing units at the Shuaiba site and the accompanying inter-refinery transfer lines.

Fluor has also returned to the project, leading a consortium including Daewoo Engineering & Construction and Hyundai Heavy Industries to win a tender worth KD962m ($3.4bn) for work at Mina Abdullah. Under the contract, Fluor will provide engineering, procurement and construction services, as well as the associated commissioning, start-up and testing support for the project. All three consortia received bank guarantees for the projects in March 2014, with contracts finalised in April and construction work due to commence in 2014. In March 2014 KNPC announced that it had awarded a $691.1m dredging contract to Dutch company Van Oord, which will reclaim land for the Al Zour refinery complex. Under the contract, the firm will dredge and reclaim 65m cu metres of sand, and execute extensive ground consolidation in a salt plain region along the Gulf coast for the refinery’s construction. The contract also involves building various channels, a basin for a future jetty, a barge dock and roads. Van Oord announced that dredging work will begin immediately, with the full project expected to finish before 2017.

Power Supply Issues

 Apart from political delays, power shortages are the most significant challenges facing refinery expansion in Kuwait. “Electrical supply is so important. Without electricity there is no production,” Nayef told OBG. Refinery shutdowns have highlighted the state’s energy vulnerabilities, most recently when a January 2014 power failure led to a week-long shutdown of all three of the country’s refineries, grinding refining activities to a halt across the country. While the exact cause was not made public, experts have suggested that a simultaneous shutdown at all three refineries indicates that problems with the state’s power grid, not onsite technical faults, are to blame.

“We have alternative supplies, but the problem with the power is that it’s unpredictable, whether it’s backup or the main supply. You always need to be cleaning out the equipment because the weather is so harsh and the air is salty. The average temperature in the shade during summer is 40 degrees, it’s unbelievably hot, so maintenance is an ongoing issue,” Suhailah Marafie, director of the department of studies and research at the Ministry of Electricity and Water, told OBG.

Electricity generation is the primary focal point for downstream gas production in Kuwait, although the generally low quality of associated gas (often considered a by-product of crude extraction) has led the country’s petrochemicals sector to use oil as a feedstock, especially with consumer electricity demand already necessitating LNG imports. However, with the discovery of non-associated gas in the northern Jurassic fields, the nation is increasingly focusing on using gas as a fuel for refineries. The planned Al Zour North power station, one of the country’s largest independent water and power projects, will see construction of a gas-fired combined-cycle power plant with a capacity of 1500 MW, and an associated water desalination plant with a capacity of 107m imperial gallons per day.


In December 2013 Kuwait’s Partnerships Technical Bureau announced it had signed the country’s first public-private partnership with a consortium including GDF Suez, Sumitomo and AH Al Sagar & Brothers to implement the project, leading to cautious optimism that the power grid will be capable of meeting long-term consumer and industry demand. However, it is still somewhat unclear whether the proposed projects will be delivered on schedule. In February 2014 parliament announced it plans to investigate the Al Zour North deal, as well as an agreement with Airbus to supply 25 aircraft to Kuwait Airways, which has led to fears that other elements of the Clean Fuels Project could face similar legislative challenges.


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