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KUWAIT - Upgrades.

On the sidelines of Hart Energy's World Refining & Fuel conference in Beijing, KPC Deputy Managing Director of International Marketing Hamzah A. Bakhash on Nov. 9, 2006, said KNPC was set to add 110,000 to 150,000 b/d of crude oil processing capacity at its existing refineries by 2012, nearly double its initial upgrade plan. (KNPC was earlier expected to add 70,000 b/d of capacity to existing facilities).

Bakhash said: "The existing refineries are adding new units, hydrocrackers, minimise fuel oil production", noting that it was a global trend in the refining business to cut down output of low-end fuel oil to favour high-value transportation fuels such as gasoline and diesel. Bakhash did not spell out where the upgrades would be.

The upgrade programme completed in 2005 has maximised the high-value products at the country's three refineries and kept pace with tighter clean-fuels restrictions. This has included replacement and overhaul of crude distillation units (CDUs) and construction of naphtha continuous catalytic reformers (CCRs). Residual fuel oil is thus 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 refineries now have the flexibility to respond to growing world demand for high quality products, with exports from the plants exceeding 700,000 b/d.

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 firm 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. 25).

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 EU 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), produces 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 470,000 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 Shu'aiba refinery caused two fatalities in June - down22KuwtRefMay30-05).

The plant's rehabilitation was mostly completed by end-2006, with some of the new units to start up before end-2007.

Mina Abdullah refinery reached its pre-August 1990 capacity of 230,000 b/d in January 1993. Its capacity has since risen to 270,000 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 December 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 October 1991, KNPC had awarded a two-year, KD3m contract for the maintenance of instruments and control systems to the local 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 January 1993 for further electrical and instrumentation work at the plant. In February 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 Vol. 56, DT 22).

Technip-Coflexip in 2003 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 $5 bn. Work under that programme included the Shu'aiba and Mina al-Ahmadi refineries. But the one for Mina Abdullah was by far the most expensive.

In April 2005 Toyo Engineering India, part of Japan's Toyo Engineering Corp., won a $13m EPC contract to design, supply and install a kerosine merox unit at Mina Abdullah refinery. This is aimed at refining kerosine and reducing sulphur content to meet product quality specifications for aviation fuel. The facilities will take 18 months to be installed.

In July 2000, a minor fire at Mina Abdullah caused slight damage. The refinery was then running flat out to meet demand because of blasts at the Mina al-Ahmadi and Shu'aiba plants in June 2000. But now the plant is running adequately thanks to help from several qualified contractors. Some of the local firms have sub-contracted international companies with a high reputation in this field.

Shu'aiba: The 190,000 b/d Shu'aiba refinery was destroyed during the 1991 war. It had to be rebuilt. It had been the most recent of the refineries, equipped with advanced units, and had been excluded in the big upgrading programme carried out in the 1980s.

Reconstruction at Shu'aiba did not get under way until urgent repair work elsewhere was completed and KNPC had some effective refining capacity available at its two other plants. Work on Shu'aiba started in the second quarter of 1992, when KNPC awarded a three-year contract to Catalytic Maintenance Ltd., a subsidiary of Delta Catalytic Corp. of Canada. This contract was for repairing facilities, making modifications and continuing to maintain the plant after its recommissioning.

Another contract was awarded by KNPC to Daelim of South Korea in December 1992 for the reconstruction of the tank farm. Engineers India was involved at Shu'aiba as part of studies it undertook on Kuwait's three refineries.

The plant was partly brought on stream in November 1993 with a capacity of about 130,000 b/d from one of its CDUs, and was running at about 150,000 b/d early in 1994. KNPC announced on Feb. 16, 1997 that repair work at Shu'iba had been completed and that the refinery had reached its pre-war capacity of 190,000 b/d. The plant's control room was upgraded by Black & Veatch Pritchard of the US under a $23m contract awarded at the end of 1996.

The refinery's slate is weighted towards middle distillates, with gasoil accounting for 34% of its output, kerosine for about 20% and gasoline for almost 10%. The plant has a 42,000 b/d catalytic hydrotreater.

However, in June 2000 an explosion at the refinery caused by a gas leak killed two people and damaged the hydrocracker. A parliamentary committee recommended legal action against Chevron over the gas leak, because the US major had designed one of the gas supply system's components in 1968. The hydrocracker resumed operations in late February 2001 after repair work. The refinery was closed down on April 28, 2001 for a 40-day maintenance period. Another fire and technical problems in early 2002 caused the refinery to be closed. It restarted in late February 2002.

Shu'aiba, was hit by a fire on Jan. 17, 2007, causing disruption to its operations. No one was injured in the blaze, caused by an explosion on a leaking gas pipeline. On Nov. 11, 2006, a blast in a heavy oil refining unit shut down operations for a week.

It was said in early 2007 that the frequency of explosions at the three oil refineries, which had increased since 1992, meant there will be no solutions in sight. Why such incidents are happening only at Kuwait's oil facilities and instillations and not in the neighboring countries which also produce oil? Given the fact the neighboring countries have bigger oil refineries and bigger oil installations, this question has been frequently asked by the Kuwaitis themselves.

The Shu'aiba refinery was back on stream in February, but with some units which were generating better revenue still down.
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Publication:APS Review Downstream Trends
Date:Jun 4, 2007
Previous Article:KUWAIT - Seeking Foreign Help.
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