Kuwait Economy and Projects Update April 2015

KUWAIT QUARTERLY NEWSLETTER ECONOMY & PROJECTS UPDATE April 2015 Issue 11

MACROECONOMIC UPDATE.....................................................

MAJOR PROJECTS NEWS UPDATE.............................................

A. KUWAIT AUTHORITY FOR PARTNERSHIP PROJECTS (KAPP)..

B. INFRASTRUCTURE AND DEVELOPMENT PROJECTS...............

C. OIL & GAS SECTOR PROJECTS...............................................

D. OTHER SECTORS PROJECTS..

2

3

3

6

7

12

KUWAIT QUARTERLY NEWSLETTER ISSUE 11

April 2015

MACROECONOMIC UPDATE The inflation levels measured by consumer price index (CPI) reduced to 2.9% in February 2015 as compared to 3.1% in November 2014 (as mentioned in our previous edition Issue 10). Food and beverages prices fell to reach 1.45% YoY in February as

compared to 3.29% YoY in November. As Kuwait imports food items for domestic consumption, the decrease was in line with declining trends in international food prices, precipitated by declining oil prices.

The prices of housing services slightly increased by 0.6% points in February from November, bringing the annual inflation rate to a drastic 11.6% YoY in February. Furthermore, prices for recreation & culture and transport cost inflation continued to increase and reached 0.9% and 1.5% YoY respectively in February 2015.

Also, minimum deflation was witnessed in communication categories of 0.1% YoY in February. However, furnishing equipment, household maintenance and miscellaneous goods & services categories showed an upward pressure during the same period.

Slowdown in YoY growth of broad money and credit facilities in February Kuwaits broad measure of money supply (M2) increased by

KD 0.51 billion from November to reach KD 33.9 billion in February, with an YoY growth reducing by 3.4% from 4.5% during the corresponding period. The increase in M2 is mainly attributed to the increase in quasi money by 2.3% or KD 0.55 billion from November to stand at KD 24.5 billion in February.

Credit facilities extended by local banks to residents continue to grow at 6.42% YoY, as compared to 5.9% YoY in November, to reach KD 30.86 billion in February. The personal facilities were up by KD 0.21 billion during the same period mainly due to increase in installment loans by KD 0.25 billion. The real estate sector also formed main source of growth with an increase by KD 22.7 billion in February from last November.

Bank deposits at local banks increased in February by 4.5% YoY, to record KD 37.93 billion. Private sector deposits constitutes 85.5% of bank deposit base to reach KD 32.44 billion in February.

Kuwait export oil dropped in March The average price of Kuwait crude oil for March reduced to

USD 50.52 per barrel, below December 2014 average price of USD 58.25 per barrel. Geopolitical situation is expected to further shape oil prices, first with Saudi Arabias military intervention in Yemen, and second, with the Wests potential nuclear deal with Iran.

Total Kuwaits crude oil production averages 2.759 million barrels per day (mb/d) in March, according to secondary sources, a increase of 1.02 mb/d from December 2014.

Inflation

Growth in Money supply and credit off-take

Local Bank Deposits

Monthly production and Oil price

Source: Central Bank of Kuwait, OPEC

-2 %

0%

2%

4%

6%

8%

10%

12%

14%Al l Items

Food & non- alcoholicBeverages

Tobaco & narcotics

Clothing & Footwear

Housing Services

Furnishing equipment,household maintenance

HealthTransport

Communication

Recreation &culture

Education

Restaurant & hotels

Miscel laneous goods &services Nov-1 4

Feb-15

0%

2%

4%

6%

8%

10%

26,000

28,000

30,000

32,000

34,000

36,000

Feb-14 May-14 Aug-14 Nov-14 Feb-15

Money supply (M2)(KD Mn) Credit off-take (KD Mn)

Growth in Money supply (M2) Growth in Credit off-take

0

20

40

60

80

100

120

2.64

2.66

2.68

2.70

2.72

2.74

2.76

2.78

2.80

2.82

Mar-14 Jun-14 Sep-14 Dec-14 Mar-15

Kuwait oil Production - Million bpd

Kuwait Export Oil basket price (USD per barrel) - RHS

0%

20%

40%

60%

80%

100%

35,000

35,500

36,000

36,500

37,000

37,500

38,000

38,500

Feb-14 May-14 Aug-14 Nov-14 Feb-15

Local Bank Deposits KD mn Government Deposits % of total

Private sector deposits % of total YoY Growth %


April 2015

List of Kuwait Authority for Partnership Projects (KAPP) projects in Kuwait

Project Name Sector Project Value

(USD Mn)

Current Status Start

Year

End

Year

Projects updates in 1st quarter 2015

Kuwait Failaka Island Development Real Estate

Development

3,300 Consultancy Bids under

Evaluation

2013 2016

Al-Zour North Independent Water and

Power Project (IWPP) (Phase 1)

Power 2,700 Request for Qualification 2010 2016

Al Abdaliyah Integrated Solar Combined

Cycle (ISCC)

Power 720 Request for Expression of

Interest (EOI) received

2008 2015

South Al-Jahra Labor City Real Estate

Development

500 Consultant appointed 2012 2017

Al Khairan Independent Water and

Power Project (IWPP)

Power 200 Prequalified 6 Companies 2012 N/A

Service and Entertainment Center

Egaila

Real Estate N/A Request for Expression of

Interest (EOI) issued

N/A N/A

Al-Zour North Independent Water and

Power Project (IWPP) (Phase 2)

Power N/A Request for Qualification 2010 2018

Other projects as mentioned in our previous edition

Kuwait National Rail Road (KNRR) Transportation 10,000 Pre-Qualification of Project

Management

Consultants (PMC) &

Preliminary Design

Consultant (PDC)

2010 2017

Kuwait Metropolitan Rapid Transit

System (KMRT)

Transportation 7,000 Pre-Qualification of Project

Management

Consultants (PMC) &

Preliminary Design

Consultant (PDC)

2012 2020

Umm Al-Hayman Waste Water

Treatment Plant (WWTP)

Water &

Wastewater

Management

1,190 Request for Proposal (RFP)

Approved by the High

Committee - Delayed

N/A N/A

Municipal Solid Waste Treatment

Facility Kabd Location

Solid Waste

Management

100 Request for Qualification

(RFQ)

2012 2015

Rest Houses And Doha Chalets Service

Centers

Real Estate

Development

50 Pre-tendering 2012 N/A

Kuwait Schools Development Program Education N/A Request for Expression of

Interest (EOI)

2012 2015

New Physical Medicine and

Rehabilitation Hospital

Health N/A Cancelled by PTB N/A N/A

Commercial, Educational, Cultural and

Entertainment Center in Abdulla Al

Ahmad Street

Real Estate

Development

N/A Pre-tendering N/A N/A

Kuwait Public Post Office Communication N/A TA Procurement N/A N/A

Communication Network and

Telecommunication Services

Communication N/A TA Procurement N/A N/A

Source: MEED, Note: EOI - Expression of Interest, RFQ Request for Qualification, RFP Request for Proposal, TA Transaction Advisor

MAJOR PROJECTS NEWS UPDATE A. KUWAIT AUTHORITY FOR PARTNERSHIP PROJECTS (KAPP)


April 2015

A. KUWAIT AUTHORITY FOR PARTNERSHIP PROJECTS (KAPP) Contd.

Kuwait publish PPP executive regulations The new Kuwait Public-Private Partnership (PPP) Law, Law No. 116 of 2014 has been published and came into full force and effect on 29th March 2015. Under the New PPP Law, Kuwait Authority for Partnership Projects (KAPP) has replaced the Partnership Technical Bureau (PTB), which was previously the main body responsible for implementation of PPP projects in Kuwait. KAPP is expected to have greater autonomy and authority than its predecessor, while its staff and assets are expected to remain broadly the same. KAPP will be supervised by and attached to the Ministry of Finance and overseen by the PPP Higher Committee. The general framework under the New PPP Law is: If the total cost of the PPP is not expected to exceed KD 60 million (approximately USD 205 million), the

investor must establish the project company. If the total cost is expected to exceed the KD 60 million threshold, KAPP must establish a public joint stock

company; and Similar to the Old Law, the PPP Higher Committee will have the power to implement development projects of

a special nature by way of a private project company (to be established by the investor), provided the value of the project does not exceed KD 250 million (approximately USD 860 million). Under the previous regime, this power was sparingly used.

For project companies that are required to be public joint stock companies, under the New PPP Law, the shares must be allocated as follows: 6 to 24% of shares to be held by project public entity/ies (with KAPP holding the shares on their behalf until

the project company is operational). A minimum of 26% of shares to be held by the successful investor, subject to a maximum of 10% being

allocated to the initiator, if any; and 50% of shares to be allocated for an IPO by Kuwaiti nationals (with KAPP holding the shares on their behalf

until the project company is operational). According to Kuwaits National Assembly Financial and Economic Affiars Committee, given Kuwaits need for mega-financing and advanced technology transfer, all new projects are intended to be implemented pursuant to the new law, as mentioned in our previous edition Issue 10. Kuwait Authority for Partnership Projects (KAPP) has now given authority to begin tendering USD 22 billion worth of major PPP projects, which is expected to be tendered this year 2015, which includes:

Largest projects to be tendered by Kuwait Authority for Partnership Projects (KAPP)

Project Name Project scope

Kuwait National Rail Road 411 kilometres

Kuwait City Metropolitan Rapid Transit System 160km, 69 stations

Failaka Island Development 43 million sqm

South Al-Jahra Labour City 1 million sqm

Al-Zour North IWPP 1,500MW, 102 MIGD

Al-Khiran IWPP 2,500MW, 125 MIGD

Umm AL-Hayman WWTP 500,000 cubic metres a day

Kabd Municipal Waste Treatment Facility 3,275 tonnes a day

Al-Abdaliya ISCC 280MW, of which 60MW solar

Eqaila Services and Entertainment Centre 112,400 sqm

Source: MEED


April 2015

Kuwait approves first phase of GCC Railway Network scheme The Kuwaits Municipal Council has approved USD 7 billion contract for the construction of the first phase of the GCC Railway Network to enter Kuwait. The Kuwaits section of the GCC Railway Network route will run south from Al-Abdali on Kuwaits border with Iraq, all way to Oman. As per the news reports, the project has now been handed over to the Kuwaits Ministry of Communication (MOC) to coordinate its plans with other government ministries and agencies regarding the path of the railway tracks in Kuwait. Part of the changes that would have to be made for the Gulf Railway, the council agreed to set aside an alternative location for a livestock projects run by the Public Authority for Agriculture Affairs and Fish Resources, over 2 million sqm from the location of the southern airbase and endorsed the relocation of the ministry of educations boy scout campsite, a storage warehouse belonging to the Kuwait Flour Mills Company and another belonging to the Public Authority for Industry. Other relocations involve moving the site of a town built for blue collar labor, a truck stop in Um Al-Aish and TV transmission towers belonging to the Ministry of Information, all seen as obstacles in the way of the railway tracks. The overall costs of the planned inter GCC railway system is estimated at USD 15.4 billion. MOC is currently prequalifying consultants for design work on the project and the construction is expected to begin next year and will be completed by 2018.

KAPP invites Request for Qualification (RFQ) for 2 IWPPs The Kuwait Authority for Partnership Projects (KAPP), formerly the Partnerships Technical Bureau (PTB) in collaboration with the Ministry of Electricity and Water (MEW) has invited companies to submit Request for Qualification (RFQ) for the development of two Independent Water and Power Projects (IWPPs). KAPP has set 2nd April 2015 as deadline for the submission of prequalification entries for both Al-Zour North 2 IWPP and the Al-Khiran 1 IWPP. PTB had invited Expression of Interest (EOI) for both projects in December 2013 (as mentioned in one of our previous edition Issue 6) were Al-Khiran IWPP will have a power generation capacity of 1,500MW and a water desalination capacity of 125 million gallons per day. Al-Khiran 1 IWPP is planned to have the same capacity as the Al-Zour North plant, but will run on low sulphur fuel oil (LSFO) as its primary fuel. The desalination capacity of the plant is scheduled to be 125MIGD. Al-Zour North 2 IWPP will have a power capacity of at least 1,500MW, to be provided through combined-cycle gas turbines, and a desalination capacity of 102 million gallons a day (MIGD).

KAPP invites Request for Qualification (RFQ) for the Kuwait School Development Program The Kuwait Authority for Partnership Projects (KAPP), formerly the Partnership Technical Bureau (PTB) in collaboration with the Ministry of Education (MoE) has invited companies to submit Request for Qualification (RFQ) document 18th January 2015 for the Kuwait Schools Development Program project. The firms have time until 19th April 2015 for the Request of Qualification (RFQ). The primary objective of the project is to develop 9 schools (5 kindergartens, 3 elementary and 1 middle school), 1 residential building for female school teachers and 1 Olympic size swimming pool in Kuwait, in line with the international best practice. As mentioned in our previous edition Issue 7, PTB had launched Expression of Interest (EOI) in the 1st quarter for the project. The term of the project agreement with the Ministry of Education (MoE) is expected to be 25 years in addition to 3 years for design, build and finance all the infrastructure assets. The new schools will have a combined capacity of 4,350 students, the residential building will entail 431 studios and the Olympic size swimming pool will comprise 10 lanes.

A. KUWAIT AUTHORITY FOR PARTNERSHIP PROJECTS (KAPP) Contd.


April 2015

B. INFRASTRUCTURE AND DEVELOPMENTS PROJECTS

Kuwaits MPW airport bids to be rejected Kuwaits Ministry of Public Works (MPW) has recommended that all bids for the contract to build new terminal at Kuwait International Airport be rejected. MPW as mentioned in our previous edition Issue 10, had asked the prequalified bidders for the contract to reduce the cost of the project. A consortium of Kuwaits Kharafi National and Turkeys Limak Holding had submitted the lowest bid for a KD 1.39 billion (USD 4.78 billion). However, as per news reports, the lowest bid exceeded the estimated cost of the project by 39% and did not meet technical specifications. The total investment in developing Kuwait International Airport is expected to reach USD 6 billion. In addition to the new terminal, an estimated KD 900 million (USD 3.2 billion) will be spent on widening runways, enhancing control tower facilities and building new cargo facilities.

Indias Shapoorji wins KD 150 million for Kuwait University contract Indias Shapoorji Pallonji has been awarded contract worth KD 150 million (USD 525 million) contracts to build a number of college buildings for Kuwait University on February 2015. Shapoorji in collaboration with Kuwaits Al Sager Trading & Contracting Company will implement the project within 42-months period. As mentioned in one of our previous edition Issue 7, Shapoorji Pallonji had submitted the lowest bid for a construction contract covering the construction of the colleges of social sciences, law and Islamic studies. Bids had been invited by Kuwait University for a deal to construct, operate and maintain facilities at the Al-Salem University Campus, as mentioned in our previous edition Issue 9. The work includes male and female accommodation buildings, administrative staff club, and teaching buildings. A pre-tendering meeting was held on 21st September 2014. US-based Perkins and Will, Lebanons Dar Al-Handasah and Kuwaits SSH are the consultants for the scheme.

Tamdeen Group launches worth USD 700 million for Al-Khiran scheme Kuwait-based Tamdeen Group, a property developer has announced worth USD 700 million plans to build the Al-Khiran mixed-used real estate development which will be built at Sabah Al Ahmed City. The project is expected to be completed by 2019. Upon completion, Al-Khiran will have a total area of 350,000 sqm comprising a 300-boat marina, two residential towers, a hotel apartment tower, a hotel and 75,000 sqm mall. The scheme is part of the third phase of the 6.4 million sqm Sabah Al Ahmed Sea City.The UKs RTKL has been appointed as the lead architect for the project, while US-based PWP is working as the landscape architect for the outdoor garden that will be part of the development.

Kuwaits government is negotiating with bidders for USD 1 billion new Jahra hospital project Kuwaits Burhan International Construction Company had submitted the lowest bid of KD 354 million (USD 1.2 billion) for the new Jahra hospital expansion project in the last year, but it was cancelled due to the firm failed to submit 10% bid bond during the allocated time frame, thereby resulting in a retendering of the project.

Lowest bidders for Jahra New Hospital project

Burhan International Construction Company USD 1.2 bn

Mohammed Abdulmohsin Al-Kharafi USD 1.29 bn

Bayan National Trading company USD 1.33 bn

Combined Group Contracting Company USD 1.46 bn

Alghanim International General Trading & Contracting

Company USD 1.55 bn

Al-Hani Construction & Trading Company USD 1.58 bn

Ahmadiah Contracting & Trading Company USD 1.69 bn

As mentioned in one of our previous edition Issue 8, Kuwaits Amiri Diwan had announced that it has cancelled the contract for the project and have currently decided to negotiate directly with companies that submitted bids for the projects construction contract rather than continuing the bidding process. The scope of works includes the construction, furnishing and operational maintenance of 1,157-bed hospital adjacent to the existing Jahra governorate of Kuwait.


April 2015

Kuwait Oil Company (KOC) awarded KD 1.28 billion worth contract during the 1st quarter of 2015 State upstream operator, Kuwait Oil Company (KOC) awarded around KD 1.28 billion worth contracts in total during the 1st quarter of 2015 over 32 different work requests, which is much higher than the KD 268.7 million in last quarter of 2014 with 27 contracts.

KOC launches prequalification round Kuwait Oil Company (KOC) has launched a new prequalification round, giving engineering, procurement and construction (EPC) contractors a chance to join its list of registered contractors. KOC had set 9th March 2015 as the deadline for prequalification document submission. The prequalification process will give a chance for EPC contractors that have already registered with KOC to apply to take on bigger projects. In the latest round, companies have the chance to register under 4 categories, as follows:

Major KOC contracts awarded in 1st quarter 2015

Contractor Description Contract Value

(KD Million) Consortium of Petrofac Intl. Ltd., UAE and Consolidated Contractors Group SAL (Offshore) (CCC)

Lower Fars Heavy Oil Development - Phase 1 (60 MBOPD) 1,22.53

IMCO Engineering & Construction Company Construction of three new 132/11 KV substations and 132KV Overhead power lines in Ratqa, Sabriya and Raudhatain

27.72

Mushrif Trading & Contracting Company New Flowlines for 5 Existing Injection Wells, 1 New Source Well & Replacement of 19 Existing Brackish Water Flowlines - WK Plus Emergency Brackish Water Line to NTF

9.00

Praxis Solutions Branch of 3B General Trading & Contracting Company

Provision of Maximo Support Services 3.41

JMT-Alghanim & Sons General Trading & Contracting Company

Provision and Maintenance of Oracle Licenses 3.18

Finesco International for General Trading & Contracting Company

Specialized Technical Services Contract for Gas Project Management Team

2.47

National Petroleum SVCS Company (NAPESCO) Consultancy Services for Project HSE Studies 1.34

Interek Global Ltd. Third Party Inspection Services 1.14

Velosi Certification for Consulting Company Third Party Inspection Services 0.94

Esolutions FZ LLC Provision & Maintenance of Maximo Software Licenses 0.80

ABS Group Inc. Third Party Inspection Services 0.76

CHOLAMANDALAM MS Risk Services Ltd. Consultancy Services for HSE Studies for North & West Kuwait areas

0.63

Bureau Veritas Third Party Inspection Services 0.58

Germanischer Lloyd Industrial Services GmbH Third Party Inspection Services 0.58

C. OIL & GAS SECTOR PROJECTS

Source: Kuwait Oil Company (KOC)

List of categories for EPC registration

Categories Contract Value (USD)

Mega Projects 1 billion - 2 billion

Major Projects 600 million - 1 billion

Large Projects 350 million - 600 million

Small Projects Lessthan 350 million


April 2015

KNPC to award 5th gas train deal Kuwait National Petroleum Company (KNPC) is expecting to award contract for the construction of Mina al-Ahmadis 5th gas fractionation train within the next 2 months. KNPC has pushed back the bid deadline for the contract to 3rd March from 25th January in its 3rd extension since November 2014, as mentioned in our previous edition Issue 10. The project is expected to be completed by 2019. Once completed, the 5th gas train will increase Kuwaits gas production capacity to 805 million cubic feet a day (cf/d) as well as boosting capacity for condensate.

Kuwait awards USD 4.2 billion Lower Fars Heavy Oil Project Kuwait Oil Company (KOC) has awarded KD 1.2 billion (USD 4.2 billion) worth contract to UK firm Petrofac and its partner, Athens-based Consolidated Contractors Company for the initial phase of Lower Fars Heavy Oil (LFHO) Development Project in North Kuwait in January 2015. The first phase of the LFHO project has a production target of 60,000 b/d of heavy crude by 2018. Once completed, the project should deliver about 270,000 b/d by 2030. Kuwait approves gas import terminal KD 1 billion deal Kuwait National Petroleum Company (KNPC) has approved KD 1 billion (USD 333 million) worth budget deals for the planned construction of Liquefied Natural Gas (LNG) import and regasification terminal due at Mina Al-Ahmadi refinery south of Kuwait. The LNG regasification terminal is expected to be implemented by the end of 2015 which will have a capacity of 1,500 million British thermal units per day (btud) and will include two berths for LNG carriers. The scope of work includes: Marine facilities for two berths to unload (simultaneously) big-size LNG carriers Regasification plant of 1,500 billion btu/d capacity Pipeline connections between the import and the existing pipeline system Four LNG storage tanks of approximately 225,500-cubic-metre working capacity each Metering system, pig launcher/receiver, NG send-out pipelines, tie-in with KOC Gas Network Start-up, training of plant operators and plant testing leading to provisional acceptance.

C. OIL & GAS SECTOR PROJECTS Contd.

Lowest bidders for LFHO

Petrofac and Consolidated Contractors Company -

USD 4.3 bn

SK Engineering & Construction Company (South Korea)

USD 4.5 bn

Eni Saipem (Italy) USD 6 bn

GS Engineering & Construction Company (South Korea)

USD 6.3 bn

As mentioned in our previous edition Issue 10, Petrofac had submitted the lowest bid for EPC contract for LFHO project. The scope of work covers the main central processing facility (CPF), associated infrastructure, production support complex and a 162km pipeline which will transport the heavy crude from the CPF to South Tank farm located in Ahmadi.

Spain-based Technicas Reunidas submitted the low bid with KD 433.7 million (USD 1.45 billion) for the contract, price came in higher than the Kuwait Central Tender Committee (CTC) budget estimate at KD 363.9 million. The bid came in lower than rival prices submitted by the UK-based Petrofac and the South Koreas Daelim Industrial and GS Engineering and Construction (GS E&C).

Lowest bidders for 5th Gas train deal

Technicas Reunidas KD 433.7 mn (USD 1.45 bn)

Daelim Industrial KD 440.4 mn

Petrofac KD 494.8 mn

GS Engineering & Construction KD 532.2 mn


April 2015

Mushrif wins USD 30.5 million Minagish oil field contract Kuwaits Mushrif Trading & Contracting Company was awarded USD 30.5 million contract, to construct flowlines and a source well in the Minagish oil field in West Kuwait. The contract, which will be construct one source well, new flowlines for five existing wells, replacing 19 brackish water flowlines and installing an emergency brackish water line. The scope of works involves: Conducting a site survey Slit trenching Finalising the pipeline route Design and detailed engineering Performing studies Procurement and supply of all materials, tools and equipment Installation and Testing Pre-commissioning and commissioning of carbon steel pipelines for Minagish Injection wells and reinforced thermosetting resin pipe (RTRP) pipelines for water wells Source well with pig launchers Headers and all associated electrical instrumentation Civil and heating, ventilating, and air conditioning (HVAC) Works in West Kuwait and RTRP line near North Tank

Farm.

KOC has set bid submission deadline for Gathering Centre 17 Kuwait Oil Company (KOC) has set 1st March as deadline for the submission of bids connected for the overhauling of Gathering Centre 17 project in North Kuwait. The estimated USD 50 100 million gathering centre 17 will involves oil and gas separation, processing plant, crude oil storage facilities of 1,000 barrel capacity for the 2 desalter trains. Kuwaits oil fields are connected to 26 gathering centres, which serve as a collection location for crude produced at several wells connected by flowlines, providing initial treatment through the separation of associated gas and removing salt. Kuwaits CTC extends deadline for USD 800 million new pipeline Kuwaits Central Tenders Committee (CTC) has set bid bond deadline for USD 800 million worth New Refinery Project Feed Pipeline until end of March. The scope of works involves the construction of about 250 kilometres of crude oil feedstock pipelines that will serve the planned 615,000 barrel per day (b/d) greenfield refinery at Al- Zour in Southern Kuwait. In October 2014, as mentioned in our previous edition Issue 10, CTC had rejected a request by Kuwait Oil Company (KOC) to retender KD 230 million (USD 814 million) pipeline projects following the withdrawal of Indias Larsen & Toubro. Larsen was the lowest bidder for USD 814 million, to carry out engineering, procurement and construction (EPC) work for a new pipeline for USD 15 billion New Refinery Project (NRP). Kuwait to study Al-Zour feasibility phase deadline Kuwait Petrochemical Industries Company (PIC) has set May 2015 as deadline to study for a feasibility phase for the proposed plans of merging the 2 mega oil projects, petrochemical plant with the Al-Zour New Refinery (NRP) project, after which will continue for 3-4 months before concluding. Kuwaits PIC has revived plans for Olefins 3 project, a petrochemical plant in the Al-Zour area, to integrate with Al-Zour refinery plant, as mentioned in our previous edition Issue 10. Recently, in March 2015, Kuwait National Petroleum Company (KNPC) has presented with a number of finding from KBC Advanced Technologies and is now reviewing possible options before moving into feasibility phase. KBC has been appointed by KNPC as technical consultant to study the proposed merging of the 2 mega oil projects.



April 2015

Kuwait mulls to re-tender Al-Zour project package 5 Kuwaits National Petroleum Company (KNPC) is considering re-tendering USD 850 million worth schemes known as package 5 of the Al-Zour New Refinery Project (NRP), to secure lower prices, after bids submitted for the scheme came almost twice the amount of about USD 1.6 billion, around 81.8% higher than KNPCs budget estimated for the package. A consortium of South Koreas Hyundai E&C, Italys Saipem, and Indias Essar has submitted the low bid of KD 454 million (USD 1.55 billion). The package 5 was scheduled to be awarded in early May, but insiders expecting delays due to the ongoing debate about pricing. KNPC is currently carrying out meetings with the consortium of engineering, procurement and construction (EPC) firms that submitted prices for the projects packages starting 26th March 2015. A number of options to be consider, either by re-tendering or by getting new competitive process or by going ahead with the scheme if it is found that the process submitted are realistic and are not exaggerated.

Murshrif bids low for Kuwait air system deal Kuwaits Mushrif Trading & Contracting Company has submitted the lowest bid of KD 12.45 million (USD 42 million) for the Kuwait Oil Company (KOC) contract to replace air system and underground piping that serves a total of 13 gathering centres in South East Kuwait.


Lowest bidders for Package 5

Hyundai E&C (South Korea)/Saipem (Italy)/Essar (India)

KD 454 mn (USD 1.55 bn)

GS Engineering and Construction Company (South Korea)

KD 459 mn (USD 1.56 mn)

Daelim Industrial (South Korea) KD 720 mn

(USD 2.45 bn)

In December 2014, as mentioned in our previous edition Issue 10, KNPC had announced that a consortium consisting of Italys Saipem and Indias Essar submitted the lowest bid worth KD 406 million (USD 1.4 billion) for the Package 4 of the Al-Zour NRP. The package 4 of the Al-Zour refinery consists of storage tanking, piping and underground works for planned refinery.

Lowest bidders for Kuwait Air System deal

Mushrif Trading & Contracting Company - USD 42 million

Integral Services Company - USD 62 million

Alghanim International General Trading & Contracting

Company - USD 67 million

Consolidated Contractors Company - USD 56 million

Gulf Spic General Trading & Contracting- USD 88 million

Ali Alghanim & Sons Group - USD 78 million

Heavy Engineering Industries & Shipbuilding Company

(HEISCO) - USD 91 million

Mohammed Abdulmohsin Al-Kharafi & Sons Company -

USD 85 million

Al-Khadda International General Trading & Contracting

Company - USD 97 million

The scope of the project includes: Replacement of pneumatic air systems and

equipment Site survey Slit trenching Supply and installation and commissioning of new

instrument air/plant air, and Associated facilities.


April 2015


Kuwaits CTC received bids for the NRP Package 1,2 & 3 Kuwaits Central Tender Committee (CTC) has announced that lowest bids for the refinerys process packages, known as packages 1, 2 and 3 were submitted on 9th March 2015. As per news reports, the low bids on all first 3 packages have come in above the Kuwaits Central Tenders Committee (CTC) budget estimate, causing concerns that the packages may be retendered.

Bidders for Package 1 - KD 918 mn

Tecnicas Reunidas (Spain)/Sinopec Engineering

(China)/Hanwha Engineering & Construction (South

Korea) USD 1.3 bn

Petrofac (UK), Samsung Engineering (South Korea) and

CB&I (US) KD 1.441 bn

Saipem(Italy), Hyundai Engineering and Construction

(South Korea), and Daelim Industrial (South Korea)

KD 1.753 bn

JGC (Japan), GS Engineering and Construction (South

Korea), Consolidated Contractors Company (Athens-

based) KD 1.768 bn

A consortium of Spains Tecnicas Reunidas, Chinas Sinopec Engineering and South Koreas Hanwha Engineering & Construction has submitted the lowest bid of USD 1.3 billion for package 1, and came in 40% more than the CTCs estimate budget. While, a consortium of US-based Flour with South Koreas Hyundai Heavy Industries and Daewoo Engineering & Construction has submitted the lowest bid for package 2 and package 3. The groups bid for package 1 came in at USD 2.8 billion, 42% above the budget estimate, while its bid of USD 3.3 billion for package 3 came in more than 27% above the CTCs estimate. On 1st June 2014, as mentioned in one of our previous edition Issue 8, Kuwait National Petroleum Company(KNPC) had issued the tender for the first 3 packages at its planned USD 14.1 billion New Refinery Project (NRP). The 3 packages are estimated to be valued at USD 9 billion. The scope of work for the first package includes the main process units, the Crude Distillation Unit (CDU), Atmospheric Residue Desulphurization Unit (ARD), Hydrothermal Upgrading Units (HTUs), and the saturate gas plant, while the second covers the support process units and the third is for the projects utilities and off sites.


Fluor (US), Hyundai Heavy Industries (South Korea), and

Daewoo Engineering (South Korea) KD 807 mn

(USD 2.7 bn)

Tecnicas Reunidas (Spain), Sinopec Engineering (China),

Hanwha Engineering (South Korea) KD 833 mn

Petrofac (UK), Samsung Engineering (South Korea) and

CB&I (US) KD 962 mn

JGC (Japan), GS Engineering and Construction (South

Korea), Consolidated Contractors Company (Athens-

based) KD 1.104 bn

Saipem (Italy), Hyundai Engineering and Construction


KD 1.139 bn


Fluor Limited (US), Hyundai Heavy Industries (South

Korea), and Daewoo Engineering (South Korea)

KD 987 mn (USD 3.3 bn)

Saipem (Italy), Hyundai Engineering and Construction


KD 1.426 bn

Samsung Engineering (South Korea), Petrofac (UK), and

CE&I (US) KD 1.757 bn


April 2015

D. OTHER SECTORS PROJECTS

Kuwait invites tenders for water pipeline deal

The Kuwaits Ministry of Electricity & Water (MEW) has invited prequalified firms to submit bids for the contract to build water pipelines to transport water from reverse osmosis (RO) units at the Doha desalination plant to the Al-Mutlaa water distribution centre. The deadline for bids submission was 17th March 2015.

Kuwait invites tenders for Doha desalination plant The Kuwaits Ministry of Electricity & Water (MEW) has invited prequalified firms to submit bids for the contract to build a new 50 million imperial gallon-a-day (MIGD) reverse osmosis (RO) desalination plant at Doha. The project will be built on an engineering, procurement and construction (EPC) basis. MEW has prequalified 9 groups for the contract, as mentioned in our previous edition Issue 9. The deadline for bids submission is 10th March. MEW is also planning to tender the second 50-MIGD phase of Doha project, a bid document is expected to be issued in April 2015.

Kuwait approved Siemens bid for Wafra substation deal Kuwaits Central Tender Committee (CTC) has approved Kuwaits Siemens Electronics & Electrical Services Companys bid for a contract to build a major susbtation in Wafra in Souther Kuwait. Kuwaits Ministry of Electricity & Water (MEW), as mentioned in our previous edition Issue 10, had received 5 lowest bidders for the major electrical deal. The Siemens Electronics & Electrical Services Company was the lowest bidder with KD 18.9 million (USD 64.5 million) for a contract to build the 400KV Wafra Z susbtation in Southern Kuwait.

Prequalified bidders

Ahmadiah Contracting & Trading Company (Kuwait)

Alghanim International General Trading & Contracting Company (Kuwait)

Arab Kuwait Contractors Company (Kuwait)

Boodai Construction Company (Kuwait)

Burhan International Construction Company (Kuwait)

Canar Trading & Contracting Company (Kuwait)

Consolidated Contractors Company (CCC) (Athen-based/Kuwait)

Copri Construction Projects Company (Kuwait)

Gulf Dredging & General Contracting Company (Kuwait)

KCC Engineering and Contracting Company (Kuwait)

Khalid Ali al-Kharafi & Brothers Construction Contracting Company (Kuwait)

Kharafi National Company (Kuwait)

Kuwait Company For Process Plant Construction & Contracting (Kuwait)

Mushrif Trading and Contracting Company (Kuwait)

United Gulf Construction Company (Kuwait)

Prequalified bidders

Abeinsa Infraestructuras Medico Ambiente (Spain)/ Gharnata International General Trading & Contracting (Kuwait)

Acciona Agua (Spain)/Hitachi Zosen Corporation (Japan)/ Al-Maseelah Trading Company (Kuwait)

Cadagua (Spain) / Mohammed Abdulmohsen Al-Kharafi & Sons (Kuwait)

Degremont (France) / Hyundai Engineering & Construction (South Korea) / Rank General Trading & Contracting (Kuwait)

Doosan Heavy Industries & Construction (South Korea) / Al-Omar Trading & Contracting (Kuwait)

GS Inima Environment (Spain) / KCC Engineering & Contracting (Kuwait) / Saudi Abdulaziz Al-Rashed & Bros (Kuwait)

Hyflux (Singapore) / Thuwainy Trading Company (Kuwait)

Mitsubishi Heavy Industries (Japan) / Toyo Engineering Corporation (Japan) / Kharafi National (Kuwait)

OTV (France) / Alghanim International General Trading & Contracting (Kuwait)


April 2015

Kuwait to tender high-tech clean-up contract The Kuwait National Focal Point (KNFP) has taken a closer to tendering for companies to excavate, transport and dump around 500,000 cubic metres of contaminated soil from South East Kuwait. KNFP is the central committee to supervise the implementation of the projects related to environmental remediation. In November 2014, as mentioned in our previous edition Issue 10, Kuwait Oil Company (KOC) had awarded USD 28.4 million worth contract to Kuwaits Alghanim International to excavate contaminated soil from the North Kuwait. Also, KNFP had intended to invites companies to bid for the package to clean up polluted soil and lakes of crude oil using specialist technology in the North of Kuwait in the first quarter of 2015. The deal is part of Kuwait Environmental Public Authoritys (KEPA) USD 2.9 billion scheme to clean up pollution from the First Gulf War known as Kuwait Environmental Remediation Project (KERP).

Kharafi National starts work on Wastewater project Kuwaits Kharafi National has started works on the contract to expand the wastewater treatment reclamation plant in Kuwait. The project will enhance its production capacity from 375,000 to 600,000 cubic meters per day (cm/d). The Sulaibiya scheme was developed as Build-Own-Transfer (BOT) project by Utilities Development Company (UDC), and was the largest of its kind using reverse osmosis (RO) in the reclamation of domestic wastewater.

CB&I wins Kuwait storage tank contract US-based CB&I, a major energy infrastructure focused company was awarded USD 60 million worth contract by JGSK JV, a joint venture between JGC Corp (Japan), GS E&C and SK E&C (South Korea). The projects scope of work includes the engineering, procurement, fabrication and construction of 39 storage tanks and two spheres for the Clean Fuel Project (CFP), a major initiative of Kuwait National Petroleum Company (KNPC) to upgrade and expand two existing KNPC refineries.

Kuwait, South Korea sign 3 MoUs Kuwaiti and South Korean government has signed 3 Memorandum (MoUs) on 2nd March 2015, in an effort to improve business relations and bilateral ties between the 2 countries. The deals were signed by Kuwaits Deputy Prime Minister and Foreign Minister and South Korean Foreign Minister at Kuwait. Among the MoUs signed includes: An agreement on mutual visa exemption for holders of diplomatic and passports Inked Memo of Understanding in the field of health Memo of Understanding signed on bilateral land transportation cooperation Apart from above agreement, 3 agreements also signed between the 2 countires. The Kuwait Petroleum Corporation (KPC) has signed 3 Memorandum of Understanding (MoUs) with South Korean energy companies, signaling its intention to increase cooperation between the two countries on oil & gas sector. The deals were signed by KPC CEO and Kuwait Petrochemical Industries (PIC) CEO as well as the chairmen of the three Korean companies (South Koreas Korea National Oil Corporation (KNOC), and South Korea Gas Company and Kia Shore Company).

D. OTHER SECTORS PROJECTS Contd.


April 2015

Kuwait, Egypt signs MoUs The Kuwaiti and Egypt government has signed Memorandum of Understanding (MoUs) aims to strengthen its bilateral cooperation for a petrochemical projects. Kuwaits investments to Egypt are estimated at USD 6.8 billion. Among the schemes included in the agreement are: Production facility to produce polypropylene and its derivatives, with a capacity of 420,000 470,000 tonnes a

year (t/y) using about 320,000 tonnes of propane. The project worth USD 2.5 billion and to be built in Alexandria. The deal is anticipated to be commissioned in 2020.

A worth of USD 100 million formaldehyde production facility which will consume an estimated 30,000 t/y of methanol from the local Methanex Corporation, located in Damietta. The facility will be located in the industrial area of Metoubes in Kafr el-Sheikh and is expected to be commissioned in 2018.

A proposed USD 1.2 billion complex to produce phosphate fertilisers and complex fertilisers in Abu Tatur in the New Valley. The facility has an estimated annual capacity of 500,000 tonnes of phosphoric acid 350,000 tonnes of triple superphosphate and 350,000 tonnes of double ammonium phosphate. The facility is expected to be built over a period of 3 years. It will use nearly 3 million tonnes of raw materials from phosphate mines in Abu Tartur every year.

An agreement proposes a new refinery or a project that will upgrade existing refineries in the Suez area. The deals were signed on 16th February 2015 by 6 companies: 1) Egyptian Petrochemicals Holding Company (Echem) 2) Egyptian Phosphate Company 3) Egyptian-Kuwait Holding 4) Saudi International Petrochemical Company (Sipchem) 5) Bawabet al-Kuwait Holding Company 6) Boubyan Petrochemical Company (BPC)

KOC signs MoUs with GE Oil & Gas Kuwait Oil Company (KOC), a subsidiary of Kuwait Petroleum Company (KPC) has signed Memorandum of Understanding (MoUs) with GE Oil & Gas to collaborate in research and development (R&D), develop cost-effective solutions for the energy sector and provide specialised training programmes for engineers to strengthen Kuwaiti skilled talent. The agreement also underlines to promote the development of local human capital including technical skills of young engineers. The deal were signed by CEO of Kuwait Oil Company, Chairman & CEO of GE and President & CEO of GE Oil & Gas and the CEO of Kuwait Petroleum Company (KPC) during the 16th GE Oil & Gas Annual meeting in Florence, Italy.

Kuwait signs 2 MoUs deal with Iraq The Kuwaiti and Iraqi government has signed 2 Memorandum of Understanding (MoUs) aims to strengthen its bilateral cooperation regarding oil fields on their shared border and the possibility of Kuwait importing natural gas from Iraq. The deals were signed by Kuwaits Acting Undersecretary of the Kuwaits Ministry of Oil and Iraqis Oil Ministry official. The bilateral talks came at the behest of the 2 countries in seeking cooperation on mutual issues, among them developing economic relations and affirming ties of friendship. Earlier in 2014, as mentioned in our previous edition Issue 10, the 2 countries had signed a number of agreements and Memorandum of Understanding (MoUs) in several areas related to economy, investment, energy, culture, education and civil aviation which is primarily intended to serve the interest of the Kuwaiti and Iraq people in diverse cooperative realms.



April 2015

Kuwait, Armenia signs 2 deal The Kuwaiti and Armenian government has signed 2 agreements that aims to strengthen bilateral ties between the 2 countries on 11th March 2015 . The agreements inked 2 deals on executive programs in the agricultural and tourism fields for 2015 2017. Also, intends to reinforce on the latest regional and international developments. The deals were signed by the Kuwaits Minister of Trade and Industry and the First Vice-Premier and Foreign Minister and Armenians Minister of Economy and Minister of Agriculture

Veolia handover Kuwaits Al-Zour desalination plant French firm, Veolia has officially handed over Kuwaits Al-Zour South desalination plant on 27th January 2015. As per news reports, Veolia had been awarded USD 190 million worth contract for the design, build and operate for AL-Zour South desalination plant with Kuwaits Alghanim International General Trading & Contracting Company in 2011. The reverse osmosis (RO) plant has a capacity of 136,000 cubic metres a day (cmd), and came online in July 2014, making up 25% of the total water treatment capacity at Al-Zour site, currently 659,700 cm/d. Veolia will be operating and maintain the plant for a period of 5 years or until 2019. Veolia is also a subcontractor on the Al-Zour North Independent Water and Power Project (IWPP). The tender process for the plant suffered multiple delays, eventually taking four years and prompting reform of the 2010 public-private partnership law.


April 2015 Issue 11

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Kuwait Economy and Projects Update April 2015

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