KUWAIT - The Refining Sector.

With a capacity of almost 1m b/d, Kuwait's oil refining sector will have a massive upgrade programme to improve as well as increase the range of products. The programme will cost more than $2.25 bn and should be completed by early 2005.

The programme will maximise the high-value products at the country's three oil refineries - Mina Al Ahmadi, Mina Abdullah and Shuaiba - and keep pace with tighter clean-fuels restrictions. A nine-month study for this was made last September by Foster Wheeler Corp. of the US, which reviewed the plants' operations. It recommended a replacement and overhaul of crude distillation units (CDUs) and construction of naphtha continuous catalytic reformers (CCRs). Residual fuel oil will be cracked into lead-free gasoline and/or high quality gasoil/diesel.

The refining sector has been fully rebuilt after the liberation war of early 1991 and Kuwait has regained its position as the second biggest refiner in the Arab world next to Saudi Arabia. But in June 2000 an explosion set the Mina Al Ahmadi refinery ablaze, causing a major shortage of high quality products in east of Suez markets. The priority now is to ensure that the refineries will once again have the flexibility to respond to growing world demand for high quality products, with exports from the refineries to be restored to more than 700,000 b/d by mid-2004.

Kuwait National Petroleum Co. (KNPC), the local refiner and a subsidiary of Kuwait Petroleum Corp. (KPC), has been implementing several upgrade projects at its three plants and improved their export facilities (see profiles on following pages).

KNPC is considering a fourth refinery to be built in southern Kuwait with a capacity of 200,000-300,000 b/d to produce high and low sulphur fuel oil for local power generation to be supplied to the Ministry of Electricity and Water (MEW). Foster Wheeler did a pre-feasibility study on this for KNPC in late 2000. MEW's demand for fuel oil then was expected to rise to 550,000 b/d by 2004 from 60,000 b/d in 2000-01. However, both KNPC and the MEW have been hesitating about this project because of plans to import gas from Qatar, Iran and Iraq (see DT No. 21). The MEW prefers to get natural gas, instead of fuel oil, for power generation in view of gas's environmental advantages. But both the MEW and KNPC have been concerned by delays in finalising a gas deal with Qatar in view of strained relations between Riyadh and Doha.

Both are also awaiting signals from Baghdad on the possibility of reviving a gas supply deal with Iraq, now that Saddam's Baathist regime has gone. Kuwait used to import up to 400 MCF/d of associated gas from southern Iraq through a pipeline built in the 1980s. KPC paid $1/m BTU for this gas, which was used mainly for power generation, until the flow stopped after Iraq's August 1990 invasion of Kuwait.

Limited privatisation of the downstream sector will not affect the refineries as state-owned entities. KNPC has sold many of its petrol stations as well as storage and distribution systems for oil products and LPG to Kuwait Company for Marketing Petroleum Products. This is a domestic marketing company formed in 1998. Shares in the company are owned by the private sector, KPC, and KNPC.

The overseas refining capacity of KPC will be raised to 700,000 b/d - 300,000 b/d in Europe and 400,000 b/d in Asia - to boost its trans-national position (see overseas expansions in DT No. 24).

KNPC's goal is to increase value and meet world demand for higher quality distillates, particularly in Asia which is the main market for Middle East export refiners. This involves converting heavy fuel oil to low sulphur gasoil/diesel, naphtha, and kerosine.

Kuwait's traditional markets east of Suez have lowered acceptable levels of sulphur content. India, the largest market for Middle East gasoil/ diesel, has reduced its sulphur content requirement from 0.5% to less than 0.2%. Japan limits the sulphur content of gasoil/diesel consumed in its market to 0.05% - the limit imposed in the European Union in recent years. The other Asian countries are gradually imposing such standards. One focus for KNPC is to produce 0.005% sulphur grades.

Middle East gasoil and diesel account for over half of Asia's total mid-distillates imports, with Kuwait and Saudi Arabia being the main exporters. KNPC wants to maintain its leading position in exports.

A Kuwait-Japan JV, Kuwait Catalyst Manufacturing Co. (KCMC), has been set up in the emirate with a capital of KD7m ($23m) to produce 5,000 t/y of catalysts. These are used to clean up sulphur and other unwanted particles from oil as it is broken down in the refining process. Most of the catalysts are used by the local refineries, and the rest is exported to other GCC states and the Indian subcontinent.

Mina Al Ahmadi, the biggest refinery in Kuwait with a capacity of more than 450,000 b/d, was heavily damaged by an explosion on June 25, 2000. The blast, caused by a gas leak at the plant's LPG pipeline which shook the ground 15 km away, killed five workers and injured 50 others. The plant was shut down completely as two of its crude distillation units with a combined capacity of 240,000 b/d were destroyed. (This was the second Kuwaiti accident in less than a month. A gas leak at the Shuaiba refinery caused two fatalities in June. There have been other accidents upstream and downstream since then, including one at Shuaiba in early 2002).

In early Dec. 2000 Swiss loss adjusters and re-insurers Robertson accepted a $340m plan, submitted by the plant's contractors Fluor Daniel of the US and SK Engineering & Construction of South Korea, to repair the refinery at Mina Al Ahmadi and rebuild and upgrade some of its units. This followed an agreement reached in late October between KNPC and Kuwait Insurance Co. over KNPC's claim arising from the explosion. The plan was to complete the work within about 32 months. The contract includes installation of two new naphtha CCRs, each with a capacity of 180,000 b/d, at the cost of about $200m, and UOP is their licence provider. Foster Wheeler is the PMC.

In October 2000 KNPC had a 200,000 b/d crude distillation unit (CDU) No. 4 back on stream. In April 2001, an 85,000 b/d CDU started up at the plant. This raised its production capacity to 285,000 b/d. In late 2001 the capacity was raised to 309,000 b/d. Then KNPC said the refinery was to return to full production capacity by Aug. 2002. But there were delays as KNPC wanted to add new units. Now it says full capacity will be ready in Oct. 2003, when the new units will have been completed. These will include a $125m gasoil desulphurisation (GOD) plant to produce 70,000 b/d of 0.01 (or 50ppm) sulphur gasoil/diesel, as well as sulphur and aromatics. This is to use a Haldor Topsoe technology being provided by under a contract signed in Nov. 1998, with Parsons being the PMC. LG Engineering of South Korea, which got the EPC contract for this in Feb. 2000. The 0.005% product will be blended with high-sulphur gasoil to produce a 0.2% grade. New storage tanks at Mina Al Ahmadi, to be completed in 2004, will allow blending to customers' specifications, including those of the EU.

Mina Al Ahmadi, which could process over 460,000 b/d of crude oil, was the least seriously damaged of the refineries in the Gulf crisis and war. It was the first to be brought back into operation. Two of its CDUs, the fluid catalytic cracker (FCC), the vacuum re-run unit and the control room were all badly damaged. The catalytic reformer, the only one in Kuwait, was virtually destroyed. The plant went back into full capacity in late June 1994. The management and supervision of reconstruction and upgrading was done by Foster Wheeler (see background in Vol. 56, DT No. 22).

KNPC appointed Rendel Palmer & Tritton of the UK as its consultant to assess the viability of marine facilities and recommend measures to rehabilitate and improve them. All units rehabilitated, repaired or rebuilt turned out to be better than they were before Iraq's invasion, as in the case of the units at Mina Abdullah and Shuaiba.

Central control was installed by the French firm Cegelec, under a KD25.8m contract signed in July 1993. Cegelec's work included the gas processing plant and installation of an operating system. Technipetrol of Italy in Oct. 1998 won a $13.1m contract to revamp and upgrade instrumentation and control systems to allow introduction of new technology and software.

Projects for Mina Al Ahmadi, tendered in mid-1994 and awarded since then, have included the following:

- Revamping the MTBE, alkylation and FCC units in one project called MAFP, which had been planned before Iraq's invasion. The work entailed refurbishing the existing units and construction of a new 1,300 b/d MTBE plant, a 4,500 b/d alkylation unit as well as spent acid regeneration and LPG pre-treatment units. The FCC expansion from 30,000 to 40,000 b/d was to provide feedstock for a polypropylene plant built for the PIC-Union Carbide petrochemical JV (Equate) which went on stream in 1997. The MAFP contract was awarded in late January 1995 to Mitsui Engineering & Shipbuilding Co. The project was completed in late 1997.

- Installation of an acid gas removal plant to sweeten associated gas and condensate feedstocks supplied to the refinery by KOC. The work involved building new processing units with a capacity to handle 210 MCF/d of gas and 44,000 b/d of condensates. Feedstocks were to come from the gas gathering centres No. 27 and No. 28 in Minagish and Umm Gudair. A $135m contract for this project was awarded to SK in September 1996.

The integrated KOC project to expand storage and export facilities at the Mina Al Ahmadi oil terminal, to cost more than $1.2 bn, is to be completed by end-2005. This will enable Kuwait to export up to 3.8m b/d. The FEED work for the project was done by Parsons Engineering Corp. of the US.

The main element is a tank farm at Mina Al Ahmadi to provide additional storage capacity of 11.4m barrels. This entails construction of 19 tanks, with 15 of them to be built at the north farm and the remaining four to be at the south farm. The project also calls for construction of four new crude oil filling and gravity manifolds and the supply and installation of five new 48-inch pipelines. The lowest bidder for the EPC contract by April 22 was Kvaerner E&C, whose price was said to be KD234.7m ($779m).

Another project to upgrade export facilities at the terminal has involved renovating the north and south piers and building a replacement for the south pier (built in the 1940s). Frederic R. Harris of the Netherlands is the PMC. Mouchel & Partners of the UK is the FEED consultant. Hyundai got the KD 100m ($324m) EPC contract for this on Sept. 27, 2000. Repair work has kept the south pier operational until 2002 and the north pier will be operational for up to 15 years. The new facility to replace the south pier will be almost 2 km long with up to six births. It will handle a variety of products including gasoil/diesel, naphtha, kerosine, butane and propane. It will serve tankers of 60,000 to 300,000 dwt.

A parallel project includes construction of a new pump station at the north pier and supply/installation of four new 14,500-ton/hour crude oil pumps and metering skids.

An offshore project calls for construction of two SPM calm buoys and upgrading of two existing SPM units, supply/installation of three new 56-inch marine pipelines from the proposed new pumping station to the two new SPM calm buoys, construction of a bunker fuel facility, and related works.

Mina Abdullah refinery reached its pre-August 1990 capacity of 230,000 b/d in January 1993. Its capacity has since risen to reach 265,000 b/d. After being damaged during the 1990 Gulf crisis and 1991 war, it was partially back on stream by end-1991, operating at the rate of 100,000 b/d.

It was the control room which suffered the greatest damage. In Dec. 1992 KNPC gave a contract to the local firm Mohammed Abdulmohsin Kharafi for reconstruction of the central control unit. The work was completed in 1994. In Oct. 1991, KNPC had awarded a two-year, KD3m contract for the maintenance of instruments and control systems to the local firm Instruments Installation & Maintenance Co. (Imco), which was the incumbent contractor for instrumentation at Mina Abdullah at the time of the Iraqi invasion. Imco was given another contract in Jan. 1993 for further elect-rical and instrumentation work at the plant. In Feb. 1993 Noyes of Australia won a $15m contract for mechanical repair work, including the coke handling unit.

The refinery's offshore loading facilities were rehabilitated by the third quarter of 1992. This and other terminal facilities were installed by Nov. 1993 (see background in Vol. 56, DT No. 22). Technip-Coflexip recently won a $20m contract to revamp the refinery's 70,000 b/d vacuum distillation unit. KNPC wants to raise the unit's capacity to 75,000 b/d. It is also to have the refinery's atmospheric residue desulphurisation (ARDS) unit revamped and expanded from 66,000 to 84,000 b/d. The capacity of the plant's sulphur recovery units are being increased from 270 d/d to 400 t/d

The Mina Abdullah refinery had been modernised, partly rebuilt and expanded by early 1989 at the cost of $2.2 bn. The project was inaugurated on Feb. 20, 1989. It was the last of three major refinery modernisation and upgrading projects under an eight-year programme in which KNPC had invested more than $5ybn. Work under that programme included the Shuaiba and Mina Al Ahmadi refineries. But the one for Mina Abdullah was by far the most expensive.

In July 2000, a minor fire at Mina Abdullah refinery caused slight damage. The refinery was then running flat out to meet demand because of blasts at the Mina Al Ahmadi and Shuaiba refineries in June 2000.