Market outlook: Kuwait to upgrade energy, petrochemical infrastructure

23 June 2014 00:00 Source:ICIS Chemical Business

Kuwait is pouring heavy investments into infrastructure to enhance its status as a major global energy and petrochemical exporter.

The country’s current crude oil production is around 2.98m bbl/day, about 70% of which is exported, according to estimates from OPEC. It has the fifth largest crude oil reserves among the 12 OPEC member countries.

This year, Kuwait is set to spend $3.5bn for infrastructure projects, up from $3.2bn in 2013, according to KFH Research, a Middle East-based research institute.

Kuwait port Corbis

Corbis Images

Investment to upgrade port facilities will alleviate congestion at Shuaiba

“Kuwait knows it needs to improve its infrastructure to stay ahead of the curve in the Gulf Cooperation Council (GCC),” said a UAE-based petrochemical buyer.

Kuwait, Bahrain, Oman, Qatar, Saudi Arabia and the UAE comprise the GCC.

POWER SUPPLY

As an integral part of its drive for better infrastructure, Kuwait is looking at upgrading its ageing power supply system, which is “the root cause of various outages in recent years”, according to a source close to a GCC oil and gas supplier.

In January 2014, a power outage hit a petrochemical complex in the port town and petrochemical hub of Shuaiba operated by Kuwaiti producer EQUATE. Production of ethylene, polyethylene (PE), ethylene glycol (EG), paraxylene (PX), styrene monomer (SM), polypropylene (PP) and benzene at the complex were all disrupted.

Although the January 23 outage lasted one day, derivative plants took a couple of weeks to resume on-spec production, according to a UAE-based petrochemical trader.

EQUATE is an international joint venture between Petrochemical Industries Co (PIC) of Kuwait, US-based Dow Chemical, Boubyan Petrochemical Company (BPC) and Qurain Petrochemical Industries Co (QPIC).

Operations at Kuwait’s three oil refineries in Mina Ahmadi, Mina Abdullah and Shuaiba that have a combined output of 930,000 bbl/day were also disrupted by the power outage.

In November 2013, another outage caused by a technical failure at a power plant paralysed operations at the Kuwait International Airport and neighbouring districts, according to reports in the local media.

“Such [power supply] disruptions are getting more and more common. Although the outages do not last long, industry players remain concerned,” according to a petrochemical trader active in Kuwait.

The Energy Information Administration (EIA) noted in July 2013 that Kuwait’s power sector “is slow to expand despite rapidly rising consumption rates over the past decade and persistent power shortages during peak demand periods”.

PORT FACILITY UPGRADES

Meanwhile, Kuwait is also looking at upgrading the port facilities in Shuaiba to address congestion that have been causing delays in cargo loading and delivery, according to a GCC-based source close to a global container shipping company.

“Congestion is still an issue at Shuaiba. So, it is only natural Kuwait looks to improve port facilities, as well,” the source said.

Building storage areas near existing and planned refineries and plants, while improving road connectivity between port facilities and warehouses, is also in the list of the country’s infrastructure priorities, according to a Kuwait-based petrochemical trader.

“Good transportation and storage are important to ensure a smooth supply chain. Kuwait is doing a good job but it still needs to improve its processes further,” the trader said.

Improving infrastructure goes hand in hand with Kuwait’s push to beef up its petrochemical and crude oil capacity.

EQUATE is looking at raising its PE capacity by 2015 from 825,000 tonnes/year currently, through a debottlenecking process at its plant. Details of the planned expansion were not available.

Kuwait has basic chemicals production capacity of about 3.4m tonnes/year, according to the Gulf Petrochemicals and Chemicals Association (GPCA).

Its crude oil output, meanwhile, is expected to increase in 2018, when construction of a new 615,000 bbl/day refinery in the district of Al-Zour is completed, according to EIA data.

“The increase in energy output will strain Kuwait’s infrastructure. But, the country is in the right direction by choosing to upgrade its infrastructure now,” according to a source from a major Kuwaiti manufacturer.

GCC INVESTMENTS

By choosing to improve its infrastructure before new plant and refinery start-ups, Kuwait is following the lead of other GCC countries such as Saudi and the UAE, according to a source close to a Saudi oil producer.

“There is urgency. Kuwait is looking at how quick its neighbours are improving their infrastructure before [new] plants and refineries come on stream,” the source said.

The UAE is upgrading its Khalifa Port in Abu Dhabi that was opened in late 2012, to meet the increasingly advanced needs of shipping and logistics companies, according to a GCC-based shipping source.

Saudi Arabia is also aiming to set up new rail infrastructure by 2018 to circumvent port congestions and improve trade links amid increased output from new facilities in the country, according to a source close to a Middle East freight provider.

“There are huge petrochemical and refinery projects coming up in the UAE and Saudi [Arabia], so the two countries do not want their infrastructure to lag behind,” the source said.

UAE’s Borouge will raise its olefins and polyolefins capacity to around 4.5m tonnes/year from 2m tonnes/year currently, with the scheduled commissioning of a world-scale petrochemical complex in Abu Dhabi sometime this year.

In Saudi Arabia, Sadara Chemical is on track to complete construction of its chemical complex in the industrial city of Jubail next year.

The complex will comprise 26 manufacturing units and is expected to yield more than 3m tonnes/year of high value-added chemical products and performance plastics.

Sadara is a joint venture between Saudi Aramco and Dow Chemical.

Upstream, a new 400,000 bbl/day refinery in Yanbu is also expected to come on stream before the end of this year.

The refinery will be operated by Yanbu Aramco Sinopec Refining Company (YASREF), a joint venture between Saudi Aramco and China Petrochemical Corporation (Sinopec).

By Muhamad Fadhil