Kuwait National Petroleum Company (KNPC) posted an almost seven-fold rise in profits in 2004/2005.

MAJOR investment is planned to boost Kuwait’s oil refining capacity. Existing refineries are being modernized and an advanced new refinery is to be built to provide environmentally friendly fuel to the emirate’s power stations.

The current combined production capacity of the emirate’s three existing refineries—Mina Abdullah, Mina Ahmadi and Shuaiba—is 930,000 barrels per day (bpd). The Kuwait National Petroleum Company (KPNC), the refining arm of the Kuwait Petroleum Corporation (KPC), plans to expand this capacity to 1.3 million bpd by 2010 by investing more than $7 billion.

Established in 1960, KNPC provides high quality refined products and liquefied petroleum gas to local and international markets. It is at the heart of the country’s energy grid and a vital element of its economy.

Together with the rise in the prices of oil products, increased operational efficiency has contributed to a marked improvement in KNPC’s balance sheet in recent years.

The company posted an almost seven-fold rise in net profits for 2004/05, reaching a record $2.15 billion from $322 million the previous year. The World Refining Association has chosen Mina Abdullah as Refinery of the Year.

SAMI AL-RUSHAID Chairman and MD of KNPC

“One reason for our success has been our technical features,” explains Sami Al-Rushaid, KNPC’s Chairman and Managing Director. “The difference between the spread of light crude and heavy crude increased considerably. Our refineries are designed for Kuwait crude, which is considered heavy to medium. In effect, we are buying cheap crude and producing high quality products. That is why Mina Abdullah has done so well, since it is the highest conversion refinery that we have.”

Construction of KNPC’s new refinery is expected to start before the end of 2006 and to be completed by the end of 2010 at a cost of $5 billion. With a crude refining capacity of 450,000 bpd, the new facility will be the largest in the region, producing low-sulfur fuel for Kuwait’s power stations.

“It will be flexible enough to handle the heaviest crude that Kuwait produces, as well as the standard Kuwait export crude,” says Mr. Al-Rushaid.

If, at some later stage, Kuwait starts importing natural gas from neighboring countries, such as Iran or Qatar, the refinery will be reoriented to produce oil products for export.

The project management contract has been awarded to the U.S.-based firm Fluor Daniel, which is also handling the upgrading of the Mina Abdullah and Mina Ahmadi refineries. A $36.9 million contract for upgrading work at the Shuaiba refinery has been awarded to Kuwait’s Heavy Engineering Industry and Shipbuilding Company.

Kuwait’s oil exporting capacity received a major boost in February with the opening of a new, state-of-the-art offshore pier at Mina Ahmadi, which is the main port for the export of crude.

Built at a cost of $330 million, the pier is the largest and most advanced of its kind in the Middle East. It is able to receive crude supertankers with a capacity of up to 350,000 tons and can cater to six vessels simultaneously, while its state-of-the-art facilities have cut loading time from 48 hours to 30 hours.

KNPC is offering a contract to build a $400 million ethane recovery unit at Mina Ahmadi, for which South Korea’s Hyundai Engineering & Construction is the low bidder. In May, it signed a 20-year contract with the Kuwait-U.S. firm Petroleum Coke Industries (PCI) for the construction of a plant to produce 350,000 tons of calcinated petroleum coke annually at Mina Abdullah.

Privatization of Kuwait’s local fuel distribution network, which KNPC was originally established to manage, is already under way. A private holding company, the First Company for Local Fuel Marketing, has been set up—with KPC holding a 24% stake—and has been taking over control of the gas stations from KNPC.