Kuwait to import fuel oil after closure of Shuaiba refinery

Supplies of residual fuel oil in the Arabian Gulf are set to tighten after the closure of Kuwait’s Shuaiba refinery on April 1, forcing the country’s utilities to import the fuel from next year until the al-Zour refinery starts running in 2019.

“Kuwait will need to import fuel oil to meet electricity generation needs for about a year,” Mohammad Ghazi al-Mutairi, chief executive of Kuwait National Petroleum Co, told reporters in Kuwait City.

Mutairi said Kuwait needs 120,000 barrels per day (bpd, or about 18,000 tonnes per day) of fuel oil in the summer and 70,000 bpd, or 10,000 tonnes per day, in winter to generate power.

The shutdown of the 200,000-bpd Shuaiba refinery, the smallest of three in the country, will see Kuwaiti supplies of the industrial fuel fall by about 250,000 tonnes per month, according to trader estimates.

“The shutdown won’t have a huge impact on Arabian Gulf (fuel oil) supplies but it will reduce overall regional flows,” said a fuel oil trader, speaking on condition of anonymity as he is not authorised to talk to the media.

Kuwait oil minister Essam al-Marzouq separately said the country would also have to import gasoline to offset part of the Shuaiba-related production decline until the commissioning of the al-Zour refinery, state news agency KUNA reported.

Kuwait’s reduced fuel oil output mirrors a wider trend in the Arabian Gulf as members of the OPEC producer group focus on exporting higher-value refined products while consuming more fuel oil for power generation.

Saudi Arabian fuel oil demand has been boosted by an increase in oil-fired power generation capacity, while Iran scrambles to upgrade its aging refineries to increase production of more valuable products at the expense of fuel oil.

CLEAN FUELS PROJECT

Part of the country’s KD30bn ($100bn) economic development plan, the Clean Fuels Project will upgrade Kuwait’s two other existing refineries with a focus on producing higher-value products such as diesel and kerosene for export.

The capacity of the Mina al-Ahmadi refinery will drop to 347,000 bpd from 466,000, while Mina Abdulla refinery’s capacity will rise to 454,000 bpd from 270,000.

The reduction in capacity at Ahmadi, after the closure of one of its crude distillation units, will be compensated for by adding new units to produce higher-value products.

Mutairi said the Clean Fuels Project would start operations by mid-2018, followed by the commissioning of Kuwait’s 615,000-bpd al-Zour refinery and petrochemical complex in 2019.