Peninsula - 16/5/2006
Kuwaiti state refiner KNPC said it was considering making an initial public offering of a 20 per cent stake in a new $6bn refinery project to local private investors.
Sami Rushaid, chairman and managing director of Kuwait National Petroleum Co (KNPC), also said yesterday KNPC might allow international companies to take a stake in the 615,000-barrel-per-day refining complex to be built by 2010.
"An IPO is an option, but certainly there are other ways," Rushaid said at a conference on major project opportunities in Kuwait, organised by business weekly MEED.
"We have a directive from the SPC, the Supreme Petroleum Council, to introduce 20 per cent equity in the new refinery project for local contractors," he said, referring to the state body in overall charge of energy policy.
"We have a consultant working with us to develop the best strategy because 20 per cent is huge, so it may be too big for an IPO," Rushaid added.
On the issue of foreign participation in the giant downstream project, Rushaid said: "Also we are not closing the door for international participation, but that is over and above the 20 per cent for local (companies)."
He added: "We are still looking for an international partner, and we will be evaluating such joint venture with any major international oil company."
Market liquidity complication
Rushaid said an IPO might be complicated by the fact that Kuwait's stock market has been declining, in line with falls across the oil-producing region.
"Because of the current stock market situation, I think it may be important that we don't go in with such a huge IPO," Rushaid added.
An IPO would suck liquidity out of the once high-flying Kuwait bourse, whose main index fell as much as 20 per cent earlier this year, reversing a multi-year rally.
Energy Minister Sheikh Ahmad Al Fahd Al Sabah said earlier this month the government would push for more partial energy sector privatisation after it had set up a private company that now operates a third of state-run petrol stations.
He said that in addition to the partial privatisation of the new refinery, the government plans to privatise at least 30 per cent of Kuwait Foreign Petroleum Exploration Co, Kuwait's foreign exploration arm, and state-run Kuwait Oil Tanker Company before year-end.
Last month, KNPC asked pre-qualified international contractors for the new refinery to come forward for bid documents. Twelve contractors have been pre-qualified for the refinery, which will replace the 200,000-bpd Shuaiba plant.
A KNPC official has said pre-tender meetings will be held in the United States in June and that offers will be submitted in August and that Kuwait's central tenders committee is expected to announce the winners by October or November.
Rushaid told the conference that the new refinery would process mostly medium and heavy crude oils and be able to produce up to 225,000 bpd of low sulphur fuel oil.
KNPC is in charge of the downstream sector in OPEC producer Kuwait, which has a crude oil output capacity of 2.7 million bpd and a refining capacity of 930,000 bpd from three refineries, which is set to rise to 1.5 million bpd when the new complex is finished.