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Mr. Mutlaq Al-Azmi Kuwait National Petroleum Company DECO-SHU Refinery ____________________________________________________________________________________
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MERTC-2017, Page 1 of 14 23-24th January, 2017, Bahrain
Middle East Refining Technology Conference (MERTC) 23-24 January 2017
“KNPC Projects, Current Priorities and Growth Plans”
Ladies & Gentlemen,
Good Morning
It is indeed a great pleasure to participate in the inaugural Middle East
Refining Technology Conference (MERTC) and address this distinguished
audience. MERTC, an inaugural flagship event for Middle East, is an ideal
platform for Refining & Petrochemical players to collaborate with
stakeholders for Technology, Innovation & Sustainable Development. I
would like to thank World Refining Association (WRA) for providing this
opportunity to address this conference on ‘KNPC Projects, Current Priorities
and Growth Plans’.
Before I proceed to speak on the subject matter, I would like to first give a
brief overview of Oil Sector in Kuwait especially KNPC.
Mr. Mutlaq Al-Azmi Kuwait National Petroleum Company DECO-SHU Refinery ____________________________________________________________________________________
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MERTC-2017, Page 2 of 14 23-24th January, 2017, Bahrain
Oil & Gas operations by the State of Kuwait are handled by Kuwait
Petroleum Corporation (KPC) and it’s eight Subsidiaries.
In Upstream Sector, KOC & KGOC operates domestically whereas
KUFPEC i.e. ‘Kuwait Foreign Petroleum Exploration Company’
undertakes upstream Operations outside Kuwait.
In Midstream Sector ;
KNPC, that I represents, handles Domestic Refining & Marketing
Operations.
KPI handles International Refining & Marketing
PIC handles Domestic and International Petrochemical Operations
& Marketing.
Mr. Mutlaq Al-Azmi Kuwait National Petroleum Company DECO-SHU Refinery ____________________________________________________________________________________
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MERTC-2017, Page 3 of 14 23-24th January, 2017, Bahrain
KAFCO handles Domestic Aviation Fuelling operations
Furthermore, just recently a new company KIPIC (Kuwait
Integrated Petroleum Industries Company) has been established
to manage refining, petrochemical as well as LNG import
Operations for the assets located in Al-Zour area.
In Midstream Sector ;
‘KPC- International Marketing’ handles International Marketing of
Crude and Products.
KOTC i.e. ‘Kuwait Oil Tanker Company’ mainly involved in the
ownership and management of tankers engaged in the transport
of crude oil, refined petroleum products and liquefied petroleum
gases (LPG).
KPC in coordination with Ministry of Energy & Water develops
Kuwait’s energy growth projections and fuel requirements to meet
local energy demand.
Mr. Mutlaq Al-Azmi Kuwait National Petroleum Company DECO-SHU Refinery ____________________________________________________________________________________
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MERTC-2017, Page 4 of 14 23-24th January, 2017, Bahrain
KNPC as Life Line of Kuwait is;
Refining & Local Marketing arm of KPC
Established in 1960, focused on Marketing initially
Operates integrated three complex Refineries, as a Profit centre
Refining capacity: 936,000 BPD.
Current Gas processing capacity with 4 trains : 2.63 Billion SCFD
Manages and Operates five Marine Export facilities
Operates Temporary LNG Import Facilities since 2009
Over 6,500 employees
Mr. Mutlaq Al-Azmi Kuwait National Petroleum Company DECO-SHU Refinery ____________________________________________________________________________________
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MERTC-2017, Page 5 of 14 23-24th January, 2017, Bahrain
KNPC plays a central role in the hydrocarbon value chain of Kuwait, as it is
responsible for Domestic Refining & Gas Processing to satisfy the local fuel
demands from Power Generation, Transportation & Domestic Industries
and supply products for International market.
Let me know talk about the main topic i.e. “KNPC Projects, Current
Priorities and Growth Plans”
Mr. Mutlaq Al-Azmi Kuwait National Petroleum Company DECO-SHU Refinery ____________________________________________________________________________________
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MERTC-2017, Page 6 of 14 23-24th January, 2017, Bahrain
Higher oil prices during the period 2010 – 2014, followed by unexpected
fall in oil prices have started new realities in the markets, where plans and
strategies are closely re-visited. The main features of the new order are (1)
lower oil revenues, (2) investments reduced significantly. This challenging
environment compelled the industry to overcome the challenges for
sustainable operations and future growth. I will share with you some of the
priorities/strategies that we have undertaken to achieve growth in
uncertain world, which would include;
Mr. Mutlaq Al-Azmi Kuwait National Petroleum Company DECO-SHU Refinery ____________________________________________________________________________________
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MERTC-2017, Page 7 of 14 23-24th January, 2017, Bahrain
Lifting subsidies for retail prices as well as electricity. From 1st September,
the price of low octane petrol has been increased by 41 percent (85 fils a
litre from 60 fils,) while high-grade petrol has been increased by 61 percent
(105 fils from 65 fils). The price of environmentally friendly low-emission
“ultra” petrol has been increased by 83 percent (165 fils a litre from 95 fils).
Energy efficiency as well as rationalizing of consumption. Diesel and
Kerosene prices were also rationalized in Jan’2015 to reduce the subsidies
in light of falling crude oil prices. Next year, subsidy for electricity will also
be lifted marginally.
Mr. Mutlaq Al-Azmi Kuwait National Petroleum Company DECO-SHU Refinery ____________________________________________________________________________________
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MERTC-2017, Page 8 of 14 23-24th January, 2017, Bahrain
KNPC as a downstream arm of KPC handles crude processing at three
refineries with a Gas Plant and LNG import facilities.
KNPC Profitability remained under pressure due to weak prices. We have
implemented a rigorous program called COPI (Cost Optimization and Profit
Improvement) to optimize the costs, identify and implement profit
improvement opportunities.
During 2015-16 total of about 130 million dollars, savings were achieved.
We continue to focus on the strategic Priorities related to Safety,
Operational Reliability, Financial/Operational Performance, Stakeholders
Management, Human Capital and Future Growth Plans.
Mr. Mutlaq Al-Azmi Kuwait National Petroleum Company DECO-SHU Refinery ____________________________________________________________________________________
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MERTC-2017, Page 9 of 14 23-24th January, 2017, Bahrain
In Accordance with KPC’s long-term strategic plan, KNPC has embarked on
ambitious program to implement mega projects with an investment of
around 40 Billion US$.
During last two years, KNPC awarded and commenced EPC of four Mega
projects i.e. Clean Fuels Project (CFP), Al-Zour Refinery, LNG Import and
5th Gas Train in addition to various other ongoing critical and operational
project.
I have to emphasis that relatively an acceptable level of coordination with
all stakeholders, have helped to speed up major and strategic projects and
we target 2020 to be the year when most of these projects will be
commissioned.
Mr. Mutlaq Al-Azmi Kuwait National Petroleum Company DECO-SHU Refinery ____________________________________________________________________________________
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MERTC-2017, Page 10 of 14 23-24th January, 2017, Bahrain
Our stakeholders includes; the government, the parliament, the media, the
Kuwaiti public, the audit entities, the minister, the board and the
management.
We are exploring new means for financing future strategic projects to
promote accountability and self-discipline within the organization.
To meet the capital requirements KPC/KNPC had decided to go for
Corporate Financing for CFP (Clean Fuels Project).
Clean Fuel Project, is to upgrade existing Refineries into an integrated
refining complex meeting the future diversified market requirements while
maintaining high Safety and Environmental standards.
Mr. Mutlaq Al-Azmi Kuwait National Petroleum Company DECO-SHU Refinery ____________________________________________________________________________________
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MERTC-2017, Page 11 of 14 23-24th January, 2017, Bahrain
The financing comprises of a combination of commercial financing from
Local and International (Conventional and Sharia Compliant) banks and
ECAs (Export Credit Agencies) supported Finance.
Early this year, a tranche loan of KD 1.2 Billion with local banks NBK and
KFH has been concluded and the balance requirement from the
international banks is expected to be finalized by end of this financial year.
KNPC plays a vital role in meeting Kuwait Energy demand. Local energy
demand is expected to grow significantly for power generation by around
6% annually. Demand for electricity more than doubled between 2003 and
2013.
Mr. Mutlaq Al-Azmi Kuwait National Petroleum Company DECO-SHU Refinery ____________________________________________________________________________________
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MERTC-2017, Page 12 of 14 23-24th January, 2017, Bahrain
Kuwait has one of the highest energy consumption rates per capita in the
world.
This is a result of a combination of factors, which are extreme weather
conditions, heavy government subsidies of electricity, an increasing
population, and energy-intensive water desalinization plants.
To meet the Kuwait energy demand, KNPC is implementing two major
projects:
Al-Zour refinery project will be one of the largest grass-root refinery in
the world. This project will meet the Low Sulfur Fuel requirement for power
plants. The Refinery is in the execution phase and is expected to be
completed by Dec’2019.
Mr. Mutlaq Al-Azmi Kuwait National Petroleum Company DECO-SHU Refinery ____________________________________________________________________________________
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MERTC-2017, Page 13 of 14 23-24th January, 2017, Bahrain
Al-Zour LNG Import facilities project, having capacity of 3000
BBTU/Day. EPC Contract singed this year in March’2016, and is expected
to be completed by February’ 2021. LNG imports is a step towards climate
change agenda that soared an importance in recent years, especially after
the Paris COP21 in December 2015.
The Al-Zour Refinery complex is an integrated Refinery–Petrochemical
complex having the LNG Import Facilities as well. As I have highlighted
earlier a new company is recently formed to operate these assets.
Kuwait Crude Capacity will be 1.4 million b/d by 2020, 51% increase from
current capacity. This would enhance the refining complexity and improve
refining margins.
Further, to effectively utilize the upstream gas production, 4th Gas train
project is commissioned in this financial year.
The 5th Gas train project EPC Contract was awarded in June 2015, and is
expected to be completed by July’ 2019.
KNPC continues to play leading role in the development of Kuwait economy,
and in order to further boost the Economy of the State of Kuwait.
Now I wish to briefly discuss the road towards stable and balanced oil
markets;
1. Oil prices have recovered following last Algeria OPEC Ministerial
meeting where OPEC had agreed on a ceiling of 32.5 – 33 million
barrels per day and thereafter OPEC announcement of production cut
of about 1.2 Million Bbl/day during end November’16 and an
Mr. Mutlaq Al-Azmi Kuwait National Petroleum Company DECO-SHU Refinery ____________________________________________________________________________________
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MERTC-2017, Page 14 of 14 23-24th January, 2017, Bahrain
agreement with Non-OPEC countries in December’16 for a production
cut of about 558,000 Bbl/day.
2. We believe that this international commitment by OPEC and NON OPEC
and an effective cooperation to implement the agreement would
rebalance the markets again.
3. The recovery towards rebalance has started, but we need to
understand that the surplus will need more time to be drawn. I am
confident that second half of 2017 will show the rebalance.
4. The price level is the product of market developments and
fundamentals, and I believe that $ 50+ per barrel is a level that will
continue with us probably until next year. However, $ 60 per barrel is
likely to be also there but subject to continued draw down in the stocks.
5. The $ 70 per barrel is not there until the market absorbs the additional
crude expected from Libya, Nigeria, possibly Iraq and Iran.
With the implementation of mega projects, I am sure KNPC will be in a
position to capitalize on the market opportunities and meet the challenges
ahead in order to be among the regional leaders in the middle-east refining
sector. Furthermore, prices have to recover to levels that will encourage
investments. Having two years of reduction in investments' allocations for
upstream on global basis will certainly not be for the well-being of the
industry, and hence oil prices will need to recover to the acceptable levels
that would stimulate adequate future investments.
With this, I thank you all and special thanks for inviting me to MERTC-2017
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