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Kuwait's KPC plans IPO for $6 billion refinery venture

29 May 2006

KUWAIT: State-run Kuwait Petroleum Corp. (KPC) is "very serious" about an initial public offering of a stake in a new $6 billion refinery project, chief executive Hani Hussain said. Hussain also told reporters late on Saturday the Gulf Arab state's government will push for more partial downstream sector privatization, especially after two private firms now run nearly two-thirds of gas stations once run by the state.

Asked about a plan by subsidiary Kuwait National Petroleum Co. (KNPC) for an IPO to float 20 percent in the new refinery, Hussain said: "This is an orientation by the Supreme Petroleum Council, so we are very serious."

"We are looking at the best ways of doing that and we are talking to several parties about doing it. This is something we are very keen to do," he added on the sidelines of a National Bank of Kuwait energy forum.

KNPC chairman Sami al-Rushaid had said the state refiner would offer the 20-percent stake to local private investors, but may also allow international companies to take part with an additional stake.

Rushaid did not give a date for the IPO, but said any offering now may be complicated by the downturn that has hit Kuwait's once high-flying stock market so far this year.

Twelve international contractors have pre-qualified for the refinery, which will be built in the south by 2010 and which will replace the ageing 200,000-bpd Shuaiba refinery. The refinery has a capacity of 615,000 barrels per day.

Rushaid was quoted by state news agency KUNA as saying Sunday the submission of all the offers will be over by August and the winners of the new refinery project will be announced before the end of this year.

Hussain said KPC would also establish this year a third company controlled by private investors to run about a third of Kuwait's gas stations.

"We have about 120 gas stations [in Kuwait], and we already established two public shareholding companies and we are going to establish the third one," he said.

"We would like it to be a third company that competes with them ... It will be during 2006," he added.

Kuwaiti Energy Minister Sheikh Ahmad al-Fahd al-Sabah has said recently the government plans to privatize at least 30 percent of Kuwait Foreign Petroleum Exploration Co. ( KUFPEC ), Kuwait's foreign exploration arm, and state-run Kuwait Oil Tanker Company ( KOTC ), before the year-end.

Separately Dow Chemical Co. and either British Petroleum or Shell may be partners in a joint-venture refinery project in China that Kuwait is considering to help build, a Kuwaiti official said on Saturday.

Kuwait said in December it agreed with China to study setting up the joint-venture refinery and petrochemical complex between PetroChina and a unit of state-run Kuwait Petroleum Corp. (KPC). The plant is estimated to cost about $5 billion.

"It will probably involve Dow as well as one of the international oil companies," KPC's CEO Hani Hussain said. Hussain said Dow was a strategic partner to Kuwait in the EQUATE Petrochemical Company in the Gulf Arab state. Last year, KPC signed a deal with Royal Dutch Shell to work together in China while KPC's overseas unit Kuwait Petroleum International ( KPI ) penned a deal with BP for investments in China.

'We have an MOU (memorandum of understanding) with Shell and BP for cooperation worldwide but the major areas will be in the Asian markets," Hussain said on the sidelines of an energy forum hosted by National Bank of Kuwait (NBK).

Kuwaiti Energy Minister Sheikh Ahmad al-Fahd al-Sabah said in December the refinery's capacity would likely be 300,000 to 400,000 barrels a day and it will process mainly Kuwaiti crude.

Hussain said on Saturday the plant's capacity would be 200,000-300,000 bpd.

"It's a joint-venture refinery as well as petrochemical complex and we are looking at details ... the location is probably going to be in Guangdong (province)," Hussain added.

KPC said in December project studies and approvals will be completed in 2006 while the building will need four years.

Asked when he sees final approvals, Hussain said: "Hopefully as soon as possible. We have a high-[level] Chinese delegation visiting us next week and we continuously have trips. We'd like to do this as soon as possible."

Hussain said Kuwait was also in talks with Bangladesh over the possibility of building storage facilities there, mostly likely for refined petroleum products.

"We are talking to them, we'll have to see if this is something that makes economic sense, that is required for them. They are also a good customer of ours," Hussain said.

Asked if it will be for crude or oil-products storage, he said: "Most likely it will be products but we will be looking to see what it is they require; we'd like to do it in a way that helps them as well as help our marketing efforts."

KPC oversees the upstream and downstream sectors in Kuwait, which controls nearly a tenth of global oil reserves and has three domestic refineries with a total crude refining capacity of up to 930,000 barrels per day. - Reuters