Middle East Refining Technology Conference (MERTC) · PDF fileIt is indeed a great pleasure to...

Mr. Mutlaq Al-Azmi Kuwait National Petroleum Company DECO-SHU Refinery ____________________________________________________________________________________

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MERTC-2017, of 14 23-24th January, 2017, Bahrain

Middle East Refining Technology Conference (MERTC) 23-24 January 2017

“KNPC Projects, Current Priorities and Growth Plans”

Ladies & Gentlemen,

Good Morning

It is indeed a great pleasure to participate in the inaugural Middle East

Refining Technology Conference (MERTC) and address this distinguished

audience. MERTC, an inaugural flagship event for Middle East, is an ideal

platform for Refining & Petrochemical players to collaborate with

stakeholders for Technology, Innovation & Sustainable Development. I

would like to thank World Refining Association (WRA) for providing this

opportunity to address this conference on ‘KNPC Projects, Current Priorities

and Growth Plans’.

Before I proceed to speak on the subject matter, I would like to first give a

brief overview of Oil Sector in Kuwait especially KNPC.


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Oil & Gas operations by the State of Kuwait are handled by Kuwait

Petroleum Corporation (KPC) and it’s eight Subsidiaries.

In Upstream Sector, KOC & KGOC operates domestically whereas

KUFPEC i.e. ‘Kuwait Foreign Petroleum Exploration Company’

undertakes upstream Operations outside Kuwait.

In Midstream Sector ;

KNPC, that I represents, handles Domestic Refining & Marketing

Operations.

KPI handles International Refining & Marketing

PIC handles Domestic and International Petrochemical Operations

& Marketing.


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KAFCO handles Domestic Aviation Fuelling operations

Furthermore, just recently a new company KIPIC (Kuwait

Integrated Petroleum Industries Company) has been established

to manage refining, petrochemical as well as LNG import

Operations for the assets located in Al-Zour area.

In Midstream Sector ;

‘KPC- International Marketing’ handles International Marketing of

Crude and Products.

KOTC i.e. ‘Kuwait Oil Tanker Company’ mainly involved in the

ownership and management of tankers engaged in the transport

of crude oil, refined petroleum products and liquefied petroleum

gases (LPG).

KPC in coordination with Ministry of Energy & Water develops

Kuwait’s energy growth projections and fuel requirements to meet

local energy demand.


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KNPC as Life Line of Kuwait is;

Refining & Local Marketing arm of KPC

Established in 1960, focused on Marketing initially

Operates integrated three complex Refineries, as a Profit centre

Refining capacity: 936,000 BPD.

Current Gas processing capacity with 4 trains : 2.63 Billion SCFD

Manages and Operates five Marine Export facilities

Operates Temporary LNG Import Facilities since 2009

Over 6,500 employees


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KNPC plays a central role in the hydrocarbon value chain of Kuwait, as it is

responsible for Domestic Refining & Gas Processing to satisfy the local fuel

demands from Power Generation, Transportation & Domestic Industries

and supply products for International market.

Let me know talk about the main topic i.e. “KNPC Projects, Current

Priorities and Growth Plans”


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Higher oil prices during the period 2010 – 2014, followed by unexpected

fall in oil prices have started new realities in the markets, where plans and

strategies are closely re-visited. The main features of the new order are (1)

lower oil revenues, (2) investments reduced significantly. This challenging

environment compelled the industry to overcome the challenges for

sustainable operations and future growth. I will share with you some of the

priorities/strategies that we have undertaken to achieve growth in

uncertain world, which would include;


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Lifting subsidies for retail prices as well as electricity. From 1st September,

the price of low octane petrol has been increased by 41 percent (85 fils a

litre from 60 fils,) while high-grade petrol has been increased by 61 percent

(105 fils from 65 fils). The price of environmentally friendly low-emission

“ultra” petrol has been increased by 83 percent (165 fils a litre from 95 fils).

Energy efficiency as well as rationalizing of consumption. Diesel and

Kerosene prices were also rationalized in Jan’2015 to reduce the subsidies

in light of falling crude oil prices. Next year, subsidy for electricity will also

be lifted marginally.


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KNPC as a downstream arm of KPC handles crude processing at three

refineries with a Gas Plant and LNG import facilities.

KNPC Profitability remained under pressure due to weak prices. We have

implemented a rigorous program called COPI (Cost Optimization and Profit

Improvement) to optimize the costs, identify and implement profit

improvement opportunities.

During 2015-16 total of about 130 million dollars, savings were achieved.

We continue to focus on the strategic Priorities related to Safety,

Operational Reliability, Financial/Operational Performance, Stakeholders

Management, Human Capital and Future Growth Plans.


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In Accordance with KPC’s long-term strategic plan, KNPC has embarked on

ambitious program to implement mega projects with an investment of

around 40 Billion US$.

During last two years, KNPC awarded and commenced EPC of four Mega

projects i.e. Clean Fuels Project (CFP), Al-Zour Refinery, LNG Import and

5th Gas Train in addition to various other ongoing critical and operational

project.

I have to emphasis that relatively an acceptable level of coordination with

all stakeholders, have helped to speed up major and strategic projects and

we target 2020 to be the year when most of these projects will be

commissioned.


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Our stakeholders includes; the government, the parliament, the media, the

Kuwaiti public, the audit entities, the minister, the board and the

management.

We are exploring new means for financing future strategic projects to

promote accountability and self-discipline within the organization.

To meet the capital requirements KPC/KNPC had decided to go for

Corporate Financing for CFP (Clean Fuels Project).

Clean Fuel Project, is to upgrade existing Refineries into an integrated

refining complex meeting the future diversified market requirements while

maintaining high Safety and Environmental standards.


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The financing comprises of a combination of commercial financing from

Local and International (Conventional and Sharia Compliant) banks and

ECAs (Export Credit Agencies) supported Finance.

Early this year, a tranche loan of KD 1.2 Billion with local banks NBK and

KFH has been concluded and the balance requirement from the

international banks is expected to be finalized by end of this financial year.

KNPC plays a vital role in meeting Kuwait Energy demand. Local energy

demand is expected to grow significantly for power generation by around

6% annually. Demand for electricity more than doubled between 2003 and

2013.


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Kuwait has one of the highest energy consumption rates per capita in the

world.

This is a result of a combination of factors, which are extreme weather

conditions, heavy government subsidies of electricity, an increasing

population, and energy-intensive water desalinization plants.

To meet the Kuwait energy demand, KNPC is implementing two major

projects:

Al-Zour refinery project will be one of the largest grass-root refinery in

the world. This project will meet the Low Sulfur Fuel requirement for power

plants. The Refinery is in the execution phase and is expected to be

completed by Dec’2019.


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Al-Zour LNG Import facilities project, having capacity of 3000

BBTU/Day. EPC Contract singed this year in March’2016, and is expected

to be completed by February’ 2021. LNG imports is a step towards climate

change agenda that soared an importance in recent years, especially after

the Paris COP21 in December 2015.

The Al-Zour Refinery complex is an integrated Refinery–Petrochemical

complex having the LNG Import Facilities as well. As I have highlighted

earlier a new company is recently formed to operate these assets.

Kuwait Crude Capacity will be 1.4 million b/d by 2020, 51% increase from

current capacity. This would enhance the refining complexity and improve

refining margins.

Further, to effectively utilize the upstream gas production, 4th Gas train

project is commissioned in this financial year.

The 5th Gas train project EPC Contract was awarded in June 2015, and is

expected to be completed by July’ 2019.

KNPC continues to play leading role in the development of Kuwait economy,

and in order to further boost the Economy of the State of Kuwait.

Now I wish to briefly discuss the road towards stable and balanced oil

markets;

1. Oil prices have recovered following last Algeria OPEC Ministerial

meeting where OPEC had agreed on a ceiling of 32.5 – 33 million

barrels per day and thereafter OPEC announcement of production cut

of about 1.2 Million Bbl/day during end November’16 and an


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agreement with Non-OPEC countries in December’16 for a production

cut of about 558,000 Bbl/day.

2. We believe that this international commitment by OPEC and NON OPEC

and an effective cooperation to implement the agreement would

rebalance the markets again.

3. The recovery towards rebalance has started, but we need to

understand that the surplus will need more time to be drawn. I am

confident that second half of 2017 will show the rebalance.

4. The price level is the product of market developments and

fundamentals, and I believe that $ 50+ per barrel is a level that will

continue with us probably until next year. However, $ 60 per barrel is

likely to be also there but subject to continued draw down in the stocks.

5. The $ 70 per barrel is not there until the market absorbs the additional

crude expected from Libya, Nigeria, possibly Iraq and Iran.

With the implementation of mega projects, I am sure KNPC will be in a

position to capitalize on the market opportunities and meet the challenges

ahead in order to be among the regional leaders in the middle-east refining

sector. Furthermore, prices have to recover to levels that will encourage

investments. Having two years of reduction in investments' allocations for

upstream on global basis will certainly not be for the well-being of the

industry, and hence oil prices will need to recover to the acceptable levels

that would stimulate adequate future investments.

With this, I thank you all and special thanks for inviting me to MERTC-2017

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