NEW REFINERY TO BE "WORLD'S LARGEST"; KUWAIT CRUDE

UNCLAS KUWAIT 003505

SIPDIS

LONDON FOR TSOU
DEPARTMENT OF ENERGY FOR IE
EB/ESC/IEC FOR GALLOGLY, DOWDY
USDOC FOR 4520/ITA/MAC/AME
USDOC FOR 3131/USFCS/OIO

E.O. 12958: N/A
TAGS: EPET ENRG BEXP KU OIL SECTOR
SUBJECT: NEW REFINERY TO BE "WORLD'S LARGEST"; KUWAIT CRUDE
ABOVE $52/BARREL

REF: A. 2004 KUWAIT 4125

B. 2004 KUWAIT 4557


1. Kuwait's planned fourth refinery, to be located in the
Al-Zour area in the south of the country, will be "the
world's largest" and will refine 615,000 barrels of crude oil
each day, according to Kuwait National Petroleum Company
(KNPC) officials quoted in August 4 newspapers. This
refinery, one of a number of large projects with potential
business opportunities for U.S. companies (Ref A),is part of
a larger goal of expanding Kuwait's refining capacity from
the current 930,000 bpd to 1.33 million bpd by 2010. The
refinery will take approximately 66 months to complete, and
is expected to begin production in 2010. The new refinery
will replace the existing Shuaiba Refinery, which currently
refines about 200,000 bpd, and will produce naphtha, kerosene
and diesel.


2. Fluor Limited UK is the Project Management Services
Contractor. Pre-qualification documents for the Engineering,
Procurement and Construction (EPC) contractor portion are due
August 8. KNPC expects to list the qualified EPC contractors
by October 2005. From earlier estimates of around $3 billion
(Ref B),the estimated cost for construction of the new
refinery is now being reported as $6.3 billion. The Kuwaiti
private sector will be invited to participate through a 20%
capital investment and through some construction work being
awarded to local contractors.


3. Kuwait Export Crude (KEC) continues to hit new records,
reaching over $53/barrel by mid-July and settling back down
to $52/barrel by the first week in August. KEC averaged
about $44/barrel in May, almost $49/barrel in June, and about
$52/barrel for the month of July. With the GOK's most recent
budget using $21/barrel as a base price for revenue
projections, it is currently estimated that the GOK will see
current year budget revenues turn out to be KD 8.1 billion
($27 billion) higher than projected. If KEC averages at
least $46/barrel for the rest of the year, the budget surplus
will be approximately KD 5.6 billion ($19 billion).

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Visit Embassy Kuwait's Classified Website:
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LEBARON