US embassy cable - 05KUWAIT3505

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: 
http://www.state.sgov.gov/p/nea/kuwait/ 
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LEBARON