Major Private Sector Industrial Opportunities Spawned by $40 Billion Kuwait Energy Plans

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). Forty billion dollars seems to be the level at which the macro deals are conceived in the Middle East. That was the sum projected for Iran's medium-term energy and infrastructure development. Iraq is hoping that its 1990 Kuwait invasion reparations will be capped at $40 billion. And $40 billion is the size of investment that Kuwait proposes to spend on mega oil and energy project developments over the next 20 years. No direct linkage, but certainly a $40 billion state-of-mind.

At the beginning of the second week of October 2004, Kuwait's energy minister, Sheikh Ahmad Al Fahd Al Sabah told the monthly banking magazine, Al Masaref, in Kuwait City that the plan provided big opportunities for the private sector to win lucrative contracts to implement these projects.

A plan to double the output of the northern oilfields from 450,000 bpd to 900,000 bpd is currently meeting with some opposition from some members of parliament, but the minister said that, as there was nothing unconstitutional about the proposal, the plan may soon be presented for discussion.

The minister is quoted as saying that "procrastination will deprive us of increasing our production share on world markets." Currently, Kuwait is pumping oil at a rate of 2.5 million bpd and has plans to increase this capacity to 3.5 million bpd by 2010, and four million bpd by 2020. It is estimated that the country holds 10% of global oil reserves. It is useful to set these production capabilities against U.S. demand, which will run at around 20.5 million bpd in 2004 with over 60% of U.S. oil requirement imported, and 45% of the total supply used in auto fuel production and supply. When you add the surging demand in China and India into the equation one can see why the minister is getting pumped up.

The development driven Project Kuwait may be managed by a consortium that groups the winning international firms with the state's Kuwait Foreign Petroleum Exploration Company (KUFPEC), reports the local daily, Al Watan. The minister is on record saying that the country will not be able to boost its production to any degree without the know-how of the international companies that have already shown an interest in Project Kuwait - ChevronTexaco (NYSE: CVX) (San Ramon, California), ExxonMobil (NYSE: XOM) (Irving, Texas), and BP (NYSE:BP) (London, UK).

Looking at downstream opportunities, the minister said that studies had been completed on plans for a $3.4 billion, environmentally-friendly, state-of-the-art refinery. The 400,000 bpd plant is likely to replace the old 200,000 bpd Shuaiba refinery. Currently, the country has three refineries, with a total capacity of 930,000 bpd. KPC (Kuwait Petroleum Corporation), the state's umbrella energy company, sees the refining capacity developing parallel to increases in crude output.

In another project, local investment has been awarded a license to construct a $150 million calcined coal factory aimed at exporting to aluminum smelters in the Persian Gulf, U.S., and East Asia. The plant, with a capacity of about 350,000 tons a year will be one of the world's largest and is scheduled to be in production in the second half of 2006.

Two petrochemical projects are expected to come on stream in 2007. An aromatics plant will have a production capacity of 761,000 tons of improved naphtha per annum, as well as 322,000 tons of benzene and other products. In the other project, an olefins unit will be built by Dow Chemical Company (NYSE: DOW) (Midland, Michigan).

A $50 million project to upgrade two sulfur removal units at Kuwait's 270,000 bpd Mina Abdullah refinery should be finished this month, which will increase each unit's capacity to 40,000 bpd from 32,000 bpd. A $38.7 million upgrade of a Mina Abdullah distillation unit for improved vacuum gas oil, a feedstock for the hydrocracker, is scheduled for June 2005, said the minister.

The Shuaiba central control has recently undergone a $15 million update, and a number of units at Mina Al Ahmadi, damaged in an explosion, have restarted after a $345 million rehabilitation. The $136.8 million rehabilitation of the refinery's 460,000 bpd loading pier will be finished in April 2005.

With the degree of activity now being undertaken and in the advanced planning stage the projected $40 billion investment over the next 20 years takes on a physical and positive perspective.

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