^ Although the refinery is now over 95 percent complete, it is uncertain when the Al Zour facility will be fully open.
Article By Ellie Pritchard
The plans for the large-scale Al-Zour Refinery were initiated in 2006, but then became dormant for a number of years. The Supreme Petroleum Council (SPC) and the Kuwait-Environmental Public Authority (K-EPA) approved the project again in February 2012.
Following delays and even a complete cessation of construction, in 2014 the state-owned Kuwait Petroleum Corporation created the Kuwait Integrated Petroleum Industries Company (KIPIC) as a subsidiary to manage and monitor the project’s progress.
In the same year, the project was awarded a consortium of engineering, procurement, and construction contractors (EPCs). Intending to build the facility in five phases, the list of contractors includes joint-ventures between some big-name industry leaders (see box text).
Site-work commenced in 2015, although active construction started in 2017. Despite both the design and construction phases having been prolonged over several years, the overall timescale for the project is not unusual for the Middle East, especially given the harsh conditions in that area.
The refinery is a logical consequence of Kuwait’s Vision 2035 which is intent on “transforming Kuwait into a financial and trade hub regionally and internationally, and becoming more attractive to investors” (source: mofa.gov.kw).
In line with KIPIC’s core belief, “Make More Possible”, the Al-Zour Refinery intends to uphold its corporate responsibility by using the latest technology ensuring compliance with strict environmental regulations to protect the local environment. In turn, the facility will produce the latest environmentally friendly ultra-low sulphur diesel fuels (ULSF).
Marine fuel revolution
With the completion date still unknown for the AlZour Refinery, it draws question as to what position it will find itself in once it is up and running. What will the oil and gas industry look like by that time? The rapid transformations happening within the marine fuel oil industry alone (just one of the areas in which Al-Zour intends to supply) apply increased pressure to refineries.
Since 1973, the International Maritime Organization (IMO) has regulated the shipping industry’s environmental impact, introducing lower caps on Sox-levels in fuel oil over the years.
However, 2020’s cap saw the sharpest limitation of sulphur levels to date, dropping from 3.5 to 0.5 percent. To be compliant, vessels have two options: either use very low sulphur fuel oil (VLSFO), or continue to burn HSFO by equipping ships with scrubbers. Strictly enforced from 1 January 2020, ship owners faced penalties such as being declared unseaworthy if they were found to be non-compliant. The future for marine fuels remains unclear. In the short term, it seems that the use of scrubbers by a growing number of vessels means that HSFO may endure alongside VLSFO for the moment (source: S&P Global Platts, 2020). See also the feature on marine fuel oil on the pages 42-46 in this issue.
In his article for consulting group Gulf Intelligence, S&P’s Dave Ernsberger writes that the Middle East’s refinery community should, despite the stricter 0.5 percent sulphur emission limit, “thrive and generate wider profit margins. This means the region will likely emerge as a key exporter of low sulphur fuel”. Although KIPIC is unable to comment at this time on the Al-Zour Refinery’s progression, one can hope that the facility will be an important contributor to Kuwait’s, and indeed the Middle East’s, future as an oil and gas export hub, and to the industry as a whole.
Timeline, updates, and delays
Despite now being over 95 percent complete, it is uncertain when the refinery will be fully open. It was scheduled to complete towards the end of 2020, but the project has faced further setbacks due to the effects of the pandemic. There is talk of KIPIC negotiating with contractors and service groups requesting declaration of force majeure due to difficulties in movement of supplies.
However, some milestones have still been reached. As the main provider for the project’s process units, utilities and infrastructure, Fluor’s President of Energy and Chemicals Mark Fields cites a “well-conceived health and safety strategy” configured by the Fluor, Hyundai and Daewoo (FHD) joint venture team as the reason they were able to continue with around 15,000 workers on site to maintain their progress throughout the pandemic.
In September 2020, the FHD joint-venture started up two boilers and began generating steam as part of project packages 2 and 3. Mark Fields: “This significant milestone marks the completion of several critical utility systems to start up and advance the refinery into commercial operations with our ongoing support”.
In response to the FHD success, KIPIC’s deputy CEO Khaled Al-Awadhi declared on Energyvoice.com that it a “true success – not only for KIPIC, but for the state of Kuwait – and will help bring energy self-sufficiency and further prosperity for all of us.”