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State-owned Kuwait National Petroleum Co. outlined an ambitious $25 billion spending plan to more than double its refining capacity to 2 million b/d by 2035.

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The expansion from 936,000 b/d of long-held capacity across the Mina al-Ahmadi, Mina Abdullah and Shuaiba refineries will take place over two phases, CEO Mohammad Ghazi al-Mutairi told Al-Rai newspaper.

KNPC is currently working to expand capacity to 1.4 million b/d, which includes starting up the greenfield 615,000 b/d al-Zour refinery following the permanent closure of the 200,000 b/d Shuaiba refinery in March 2017.

The first phase of the new expansion will take domestic capacity up to 1.7 million b/d in 2025, before hitting 2 million b/d by 2035 under the second phase, Mutairi said.



Hitting the 2035 target will come with the construction of a new refinery, Mutairi added, without giving any further details.

"This expansion will be a solution for the treatment of heavy oil in line with the expected increase in production from the exploration and production sector," he said.

It builds on Kuwait's previous 2030 goals, set in 2009, which included raising downstream capacity by 480,000 b/d to 1.4 million b/d with the completion of Al-Zour. Under the new plan, Kuwait's domestic refining capacity will represent 42% of the country's crude oil production capacity by 2040, up from 27%, Mutairi noted.

Kuwait currently has crude oil production capacity of 3.2 million b/d, but hopes to reach 4 million b/d by the end of the decade. This will include 3.65 million b/d produced by state upstream operator Kuwait Oil Co., and the remainder from its share of output from the Partitioned Neutral Zone, shared with Saudi Arabia.

Analysts doubt whether the Persian Gulf state will be able to meet this deadline however, having seen it repeatedly pushed back, however.


DOMESTIC PETROCHEMICALS EXPANSION


Al-Zour will process Kuwait's heavy crude from the north of the country and provide more low sulfur fuel oil for power production. KNPC signed $13 billion in contracts in mid-October 2016.

The refinery was meant to be completed mid-next year, but delays in awarding the final contract covering the construction of a pipeline to supply crude oil could push its startup date well into 2020.

"A lot of Al-Zour's production was earmarked for domestic consumption. There will be lots of low sulfur fuel oil. But it's not clear if this will stay in the country. It will be very valuable post 2020, when the International Maritime Organization's new regulations come in," said Stephen George, chief economist at KBC Advanced Technology.

"The real driver for Al-Zour is to bring petrochemicals to Kuwait. That is what got it over the last hurdle," George explained. The refinery had faced stiff opposition in parliament until contracts were finally tendered and awarded.

Alongside Al-Zour, Kuwait plans to build a new integrated petrochemicals facility, known as the Olefins-3 project, which will entirely use liquid feedstock from the refinery.

Kuwait Petroleum Corp., KNPC's parent company, has been in talks with international oil companies including Shell, BP and Total for the technical consultancy work for a steam cracker with an ethylene capacity of 1.4 million mt/year, a 450,000 mt/year propylene plant, a 940,000 mt/year polyethylene plant and a 550,000 mt/year polypropylene plant.

"This integration will increase the profit margin to enhance the value of each barrel of oil produced, in addition to the expansion of petrochemical products, the development of new products with higher value and increased production capacity of petroleum products, which has a significant impact in pushing the oil industry in the country and keep pace with the global market," Mutairi said.

KNPC and KPC could not be reached to confirm the statements.

--Adal Mirza, adal.mirza@spglobal.com
--Edited by Irene Tang, irene.tang@spglobal.com