Kuwait’s US$12 billion refineries upgrade signals progress

Kuwait has approved bids worth a total of US$12 billion for major upgrades at two oil refineries, the state-run oil company said, in a sign it is moving ahead with large infrastructure projects.

The clean fuels project is a specification upgrade and expansion of Kuwait’s largest refineries as part of the Arabian Gulf state’s economic development plan, which has faced delays partly due to political instability.

A consortium led by Japan’s JGC won a tender for work worth 1.361 billion dinars (Dh17.7bn) at the 460,000-barrels-per-day (bpd) Mina Ahmadi refinery, a Kuwait National Petroleum Company spokesman said, citing a decision from the country’s central tenders committee.

Britain’s Petrofac, in a bid worth 1.07bn dinars, is expected to carry out work at the 270,000 bpd Mina Abdullah refinery, and the US-based Fluor Corporation will also work on Mina Abdullah after a bid of 962 million dinars, he said.

Contracts for the work are expected to be signed with the companies in April and construction work should begin shortly afterwards, the spokesman said.

Kuwait awarded Foster Wheeler with the management and service contract for the clean fuels project in December 2012 in a deal worth about $500m.

Foster Wheeler said at the time that the project would increase the amount that the refineries can process per day by 264,000 barrels to 800,000 and be ready in 2018.

Apart from the clean fuels project, worth about $4.6bn in total, Kuwait also wants to build a new 4bn dinar refinery called Al Zour and then shut its third, older 200,000 bpd Shuaiba refinery.

Such projects in Kuwait’s 30bn dinar development plan, announced in 2010, are a test for a country which has struggled to invest in infrastructure and attract foreign investors.

However, the country is investing abroad. Kuwait’s sovereign wealth fund will invest €500 million(Dh2.5 billion) in Italian companies in coordination with Italy’s own strategic investment fund, the European state’s prime minister Enrico Letta said on February 3 it .

The deal follows similar agreements with Qatar’s investment fund last year to invest in Italian companies operating in the fashion, food and tourism sectors and a separate deal with the Russian Direct Investment Fund.

Kuwait and Italy will create a company with capital of €2.5bn, of which 80 per cent will come from Italy’s strategic investment fund, the FSI, and the remainder from the Kuwait Investment Authority.

“This is an extraordinarily important development, it’s an injection of confidence in our country,” said Mr Letta in Kuwait during a visit to the Gulf states to attract interest in Italy as an investment destination.

The FSI said the deal would be signed formally in March.

That deal and the oil project bids will probably be scrutinised by government members in Kuwait before being signed off.

Policymakers often question large government projects and have delayed or scuppered them in the past. Such parliamentary inquiries are common in Kuwait.

Last week Kuwait’s parliament voted to investigate a contract awarded to a GDF Suez-led consortium for a power project and a deal between the state carrier and Airbus to buy and lease aircraft, in a sign that policymakers will continue to question state investment decisions.

Policmakers also want to investigate all deals agreed by Kuwait Airways, which is attempting the biggest overhaul of its fleet since the 1990 Iraqi invasion.

In December it signed a provisional agreement with Airbus to buy 25 new aircraft in a deal worth $4.4bn at list prices.

The order would include the purchase of 10 A350-900 and 15 medium-haul A320neo jets. The airline also aims to lease 12 aircraft from Airbus pending delivery of the new planes.

* Agencies