KUWAIT - Kuwait Is Consolidating Trans-National Refining & Retail Operations.

Kuwait Petroleum Corp. (KPC) has been described as "the eighth sister", with upstream and downstream systems operating in various parts of the world. It is also called a trans-national. KPC has $4.5 bn allocated for a new programme of overseas acquisitions to consolidate operations on both sides of Suez. Minor interests in some countries and poor operations in others have been liquidated to cut costs.

KPC's overseas upstream arm, KUFPEC, has exploration and production (E&P) activities on both sides of Suez. Its shares of oil and gas production will be rising steadily in the coming years. KUFPEC is to be privatised (see OMT).

KPC's European refining and retail unit, Kuwait Petroleum International (KPI), has been rated as one of the world's largest oil firms in view of its extensive operations. KPI's head office was moved from London to Kuwait in mid-2000 to cut administrative costs and create employment opportunities for Kuwaitis.

KPI is expanding its presence overseas, in March 2005 having signed memoranda of understanding (MoUs) with BP and Shell to study marketing opportunities in China and other east of Suez markets. Under the terms of the MoU with BP, the two companies will jointly seek investment opportunities in China, co-operating in the supply, distribution and marketing of refined products to Beijing and other Far Eastern countries. BP has huge investments in China. KPI is on having an integrated oil refining/petrochemicals JV in China (see gmt25KwtTransJun18-07).

The MoU with Shell will see KPI and the oil major exploit downstream operations around the world, concentrating on markets which have strong downstream fundamentals and high growth for refined products. KPI and the KPC group are particularly keen on marketing an extra heavy/sour crude oil stream which will be available for export in the coming years (see OMT/GMT No. 23).

KPC's overseas assets have been the subject of varied estimates, due to tight secrecy around its operations. The finance ministry's KIA and the oil ministry's KPC have stakes in chemical ventures in various parts of the world, including the expanding German combine Hoechst (see Gas Market Trends of this week).

KPI has since 2004 pursued a policy of selling some of its overseas assets which are no longer of strategic importance to the group. In September 2004 it announced the sale of Kuwait Petroleum Great Britain (KPGB) to the UK's Refined Holdings consortium. This included 75 Q8 petrol stations and wholesale operations. But KPI kept KPGB's jet fuelling business, a lubricants plant and distribution system and the Diesel Services unit. Also in September 2004, KPC sold almost half its stake in French pharmaceuticals giant Sanofi-Aventis for 2,300m ($2,778m). This was done in a placement managed by UBS and Morgan Stanley.