Land allocation finalised for Al-Zour refinery

June 27, 2008 KUWAIT -- Kuwait's Municipal Council has agreed to an expansion of Kuwait National Petroleum Company (KNPC)'s land in the al-Zour area, sweeping aside one of the last obstacles in place for the large al-Zour refinery project to go ahead.

The 615,000-b/d refinery project has been at risk several times, as it has been planned on land partly outside KNPC's allotment and in an area of the Neutral Zone between Saudi Arabia and Kuwait, which was being used by U.S. major Chevron as part of a steam injection programme to raise the Zone's production of heavy oil.

The planning and the tendering of the refinery has gone ahead without the due consultation of the involved parties or any securing of the relevant licences, apparently under a strategy to create a fait accompli—which seems to have worked.

The project was initially costed well below the mark, with its first and second budgets coming in at US$6.3 billion and US$12 billion, while no contractor has been willing to proceed for less than the current budget of around US$15 billion—a figure that could well rise even further alongside global construction costs. The fact that the land issue remained unresolved as the construction contract tendering got under way further signalled severe planning problems within the KNPC project team.

© 2008, Global Insight Limited.