Clean progress in KuwaitMay 31, 2018
Mohammad Ghazi Al Mutairi, CEO of Kuwait National Petroleum Company (KNPC), talks to TOGY about the latest progress on the Clean Fuel Project (CFP), Fifth Gas Train and other key projects, as well as plans for new integrated downstream complexes. KNPC is Kuwait’s main state-owned downstream company.
On integrated projects: “To increase the profitability of any downstream industry, the refinery has to be integrated with petrochemicals. Without integration, you will not capture the whole supply chain. This approach is more economical, logical and profitable. It is also a diversification of the product. This is the future for Kuwait.”
On the 2040 strategy: “The KNPC 2040 downstream strategy’s main pillar is to increase the processing capacity to 2 million bpd. First, the commissioning of the New Refinery [Al Zour] will boost this capacity to 1.4 million bpd. We are thinking of adding a 300,000-bpd refinery by 2025. The second 300,000-bpd refinery will come on line by 2030. Combined, we will reach the target of 2 million.”
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What were the main developments for KNPC since mid-2017?
In 2017, our biggest achievement was meeting the target of our operating plan, which was to have 730,000 bpd of total refining capacity. This, of course, was achieved even with the closure of Shuaiba refinery, which is now retired according to plan. The closure is connected to the CFP mega-project because most of the Shuaiba site facilities, including oil tank farms and the jetty, will be operated by the Mina Abdullah refinery.
With regard to CFP financing, KNPC has signed an ECA-backed corporate loan facility of USD 6.245 billion. The common terms agreement was signed with five export credit agencies [ECAs] on May 24, 2017, with a total value of USD 5.245 billion and loan agreements were executed on August 29, 2017. Earlier, on March 30, 2017, KNPC signed a loan agreement with JBIC/NEXI for a facility of USD 1 billion. As of March 2018, KNPC has drawn down USD 3.1 billion.
We have achieved all of the targets we set for ourselves in many respects, including in HSE, personnel development and so on. Also important is that we made great progress on the mega-projects, first the CFP but also on the Fifth LPG Gas Train. The Fourth Gas Train was completed in 2015, which was a great achievement.
We managed to commission the north LPG tank, which was a big project. We also began launching extra petrol stations. There are 19 under construction and 15 in the design phase. Our objective is to reach 100 extra petrol stations by 2024. It depends on the land allotment.
We also managed, in co-ordination with KPC, to take over KAFCO [Kuwait Aviation Fuelling Company] as a full subsidy of our company. It will be 100% owned by KNPC. We will continue with our normal activity and are managing to supply the market with a very stable product.
What is Kuwait’s total refining capacity right now?
The capacity [as of April 2018] is 730,000 bpd. After we complete the CFP, there will be two facility retirements and then we are adding a big crude distillation unit of 264,000 bpd in Mina Abdullah. This will increase the total capacity to 800,000 bpd.
At what stage is the CFP?
We are pressing on well with the CFP and completed 94% of the project activities. We are aiming to start commissioning the utility by May, and the first unit, hopefully, in August. The project handover should be between October and December 2018. Our staff are being prepared in detail for the commissioning.
Are there any expected changes in the plan?
No. The project is maintaining the same budget, but now we are focusing on the last stage: handover from the contractor to the company and starting to do the precommissioning and commissioning activity. This is now KNPC’s focus.
Will the products meet international environmental standards?
Yes. The project will shift KNPC’s specification to Euro 4 and Euro 5. We will be meeting Euro 4 and 5 for all projects, including diesel. We are employing many of the latest technologies from big-name technology providers such as Chevron and Shell. It is a major shift to the latest technology and this is all to meet the latest developments in product specifications.
Are these technologies shared with your partners at the Kuwait Integrated Petrochemical Industries Company (KIPIC) for the Al Zour refinery project?
Yes, of course. The Al Zour project started with KNPC before being handed over to KIPIC. KNPC has been fully supporting our sister company since KIPIC started more than one year ago. It is a promising company that will handle refining, LNG and also the petrochemical integration of the refinery.
We have a lot of close collaboration with KIPIC. We are very supportive in providing logistics and workforce support. Most of the refinery staff were smoothly transferred from KNPC to KIPIC and we will continue to support them so they can succeed. We see ourselves as one team: We are all a “K-company.” There is no competition between us and KIPIC. We are all one company for the country.
The Think-K Expert Communities initiative was established to pool expertise among different K-companies and to facilitate sharing of knowledge and experience. Its mission is to explore new possibilities, find solutions to challenging problems and create beneficial opportunities.
KNPC is responsible for establishing two such communities, one in IT and the other in engineering. The first event was successfully conducted on September 12, 2017, and the second event, for the IT community, was conducted in February 2018.
What are some of the latest technologies and downstream methods applied in the CFP?
KNPC’s collaboration with international and local expertise started in the early phases of the project and these companies’ co-operation in delivering downstream strategies has been an essential success factor. They have proven to be capable based on their performance in helping to deliver the CFP project.
Some of the technologies I am particularly happy to mention are the two elevated flare stacks in each system (HP and LP [high-pressure and low-pressure]) with a common derrick structure to ensure uninterrupted operations. These are in addition to demountable tips, which will enable maintenance activities to be carried out on the ground level.
We also installed ultra-low NOx burners for fired heaters and boilers in both refineries to ensure that they are not exceeding emission limits set by the Kuwait Environment Public Authority.
Equally, to improve cold flow properties to meet EU market standards, we installed a dewaxing bed in the DHT [diesel hydrotreating unit] reactor.
Lastly, we have hydrogen membrane facilities in the CFP ARDS [atmospheric residue desulphurisation] units. This is a new technology used in Kuwait’s refineries that will help hydrogen production from ARDS recycled gas.
KNPC intends to lift the domestic refining capacity to 2 million bpd by 2025. How will this be achieved?
This is part of the implementation plan for the long-term KNPC strategy for 2040. We started with a 2030 long-term strategy for downstream and part of that mandates that we review our strategy every five years. We came to a point where the whole strategy had to be revised and adjusted to meet the 2040 goals.
The KNPC 2040 downstream strategy’s main pillar is to increase the processing capacity to 2 million bpd. First, the commissioning of the New Refinery [Al Zour] will boost this capacity to 1.4 million bpd. We are thinking of adding a 300,000-bpd refinery by 2025. The second 300,000-bpd refinery will come on line by 2030. Combined, we will reach the target of 2 million.
Of course, the strategy has other factors and pillars to it, such as personnel development and the development of HSE, as well as petrochemical integration.
Will KNPC follow this integrated approach with the other two refineries?
Yes. Al Zour refinery has petrochemical integration. The project is in the FEED stage. We are also studying petrochemical opportunities for the future. If there is an opportunity, we will go for it. Some of the streams from the refineries will be transferred as feed to the petrochemical industry.
Will the upcoming refineries continue adopting the integrated approach?
Yes, of course. To increase the profitability of any downstream industry, the refinery has to be integrated with petrochemicals. Without integration, you will not capture the whole supply chain. This approach is more economical, logical and profitable. It is also a diversification of the product. This is the future for Kuwait. Petrochemicals are the future for Kuwait.
The petrochemical industry has been very stable for the last few years. It is more stable than refining, which tends to be cyclical. Fully integrating petrochemicals and refineries will add a lot of value to the downstream industry. Also, petrochemicals open an opportunity for small Kuwaiti manufacturers to operate in the downstream and grow, and to add to the country’s economy. This will boost local content.
What is the strategy to involve local content in the projects?
For the CFP, 20% of the investment has to be spent locally, either on Kuwaiti manufacturers or suppliers or the contractors. Recently, the law has been supporting local companies. Now, when international companies come, they have to employ at least 30% Kuwaitis. The idea is to get the big IOCs contracting local companies. This is to promote the industry within the country. It is very fair. We are investing many billions of dollars, so this must be reflected in the development of local people, as well as companies and their know-how.
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