KNPC, Daelim Industrial Plans $893 Million Deal for New Gas Production Line at KNPC Refinery

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Researched by Industrial Info Resources (Sugar Land, Texas)--South Korean engineering and construction firm Daelim Industrial Company Limited (KRX:000215) (Seoul, South Korea) and Kuwait's national state-owned oil refining company The Kuwait National Petroleum Company (KNPC) (Safat, Kuwait), an arm of the state-owned leading oil firm Kuwait Petroleum Corporation (KPC) (Safat, Kuwait), are very close to signing an $893 million contract agreement for a new gas production line at KNPC's Mina Al-Ahmadi oil refinery. The refinery, with an installed capacity of 465,000 barrels per day (BBL/d) (or 73,900 cubic metres per day) is on 1,053 hectares of land, 45 kilometers south of Kuwait City.

The new gas production line would be the fourth train at the refinery. "We already have three trains, this is the fourth gas train with an associated pipeline," said Mohammed Mansour Al-Ajmi, the company's corporate communications official. He added that the company hopes to conclude the deal by the end of June.

The pipeline would transport liquefied-petroleum gas (LPG) to the Mina Al-Ahmadi plant, Kuwait's largest oil refinery. The gas pipeline facility will have an installed capacity to move 850 million cubic feet per day of LPG to the plant.

LPG is used as a fuel for heating appliances, vehicles, cooking, petrochemical feedstock and gasoline blending.

KNPC Deputy Chairman Assad Al Saad, told reporters that Daelim Industrial had submitted the lowest bid for the gas-production facility development project, adding that the bid is being reviewed and considered by the Central Tenders Committee.

This project is reportedly part of KNPC's plans to invest $410 million in the next three years. It includes an investment of an estimated $517 million to augment the production capacity of a prevailing plant meant for acid gas treatment.

KNOC's other two refineries include the Mina Abdullah Refinery, which is on 784 hectares of land, 46 kilometers south of Kuwait City, with an installed capacity of 270,000 BBL/d (or 43,000 cubic metres per day); and the Shuaiba Refinery, spanning 113.2 hectares at the Shuaiba Industrial Area, 50 kilometers south of Kuwait City, with an installed capacity of 195,000 BBL/d (or 31,000 cubic metres per day).

In addition, the company recently announced that it is planning a fourth refinery, known as the Al Zour Refinery, expected to have an installed capacity of 615,000 BBL/d (or 97,800 cubic metres per day). Once commissioned, it is pegged to become the largest refinery in the Middle East.

Meanwhile, Kuwait, which is a member of the Organization of Petroleum Exporting Countries (OPEC), is augmenting its domestic gas supply capacity and infrastructure to meet the skyrocketing demand from the growing domestic power and industry sectors. Kuwait has not developed its gas reserves very quickly. The country boasts of about 63 trillion cubic feet of natural gas reserves. However, it produced only 449 billion cubic feet of dry natural gas in 2008, most of which was "associated gas" found along with oil.

Kuwait's oil reserves are more than 60 years old, which is why field maturity is being seen as a major problem.

According to data from the U.S. Energy Information Administration, Kuwait produced nearly 2.5 million barrels of oil per day in 2009. Highly dependent on its oil export market for revenue, Kuwait exported 2.4 billion BBL/d of crude oil and refined products in 2008. Via Project Kuwait, the country plans on increasing crude oil production to 4 million BBL/d by 2020.

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