Issue No.31 January,March 2005

1980- 2005 KPC Commemorates its Silver Jubilee In This Issue

Special file on the history of oil in Kuwait and the circumstances leading to the creation of KPC and development of its various oil related activities.

Sheikh Ahmad Al Fahad, Minister of Energy, underlines the importance of the oil sector and describes it as the back- bone of Kuwait’s economy. He also highlights future plans to enhance production and refining capacity.

Hani Abdulaziz Hussein, KPC’s A series of interviews with for- The crucial phase KPC endured CEO, sheds light on key chal- mer oil leaders to ascertain their during the Iraqi occupation and lenges and promising upstream views on the performance of the the triumphant reconstruction and downstream opportunities. Corporation and their aspirations process. for the future of the oil industry.

KPC’s Mission Editor In Chief

Kuwait Petroleum Corporation (KPC) is a Corporation of economic character, Talal Al Khalid Al Sabah run on a commercial basis and fully owned by the State. It is one of the world’s Managing Director major oil & gas companies and its activities are focused on petroleum explo- Petroleum Services ration and production, refining, marketing, petrochemicals, and transport. KPC’s mission is to manage and operate these integrated activities worldwide in the most efficient and professional manner. In addition to growing share- holder value whilst ensuring the optimum exploitation of Kuwait hydrocarbon resources.KPC has an important role in contributing to the support and devel- opment of the Kuwaiti economy, developing national manpower, maintaining superior commercial and technical expertise and proactively managing the environmental, health and safety aspects related to KPC’s businesses.

2 KPC WORLD,JANUARY,MARCH 2005 Special report on KPC’s overseas An account of KPC’s determina- A summary of KPC’s strategic KPC’s humanitarian footprints expansion and forays into new tion to become a regional leader directions in all areas of the oil locally and internationally. markets. in petrochemicals. industry.

KPC World Team Artwork & Design The KPC World Team expresses its thanks and apprecia- tion to all who contributed editorial and information mate- Mohammad Al Zamanan Alireza Jelvehnejad rial and photographs to produce this issue of KPC World. Merwi Al Khaldi Al Assriya Printing Press Kamal Al Khars Sheikha Al Tourah Copyediting Rawabi Al Bannai P.O. Box: 26565-Safat-13126 Kuwait Dharey Al Jarallah Anthony Borrows Tel: (965) 2400969 Alia Al Jasmi Trident EWC Fax: (965) 2407872 English Writing Consultants L.L.P. Website: www.kpc.com.kw E-mail: [email protected]

KPC WORLD,JANUARY,MARCH 2005 3 Towards more Progress, Success

Just like the heart that pumps blood into the well as scientific and technical capacities, and it veins, the land of Kuwait breathes life into the is worth mentioning the enormous develop- veins of our country, and bestows upon it illumi- ments in the fields of oil exploration, production nation, prosperity and success. Day by day, and refining, and in security, safety and envi- Kuwait has become an oasis priding itself on the ronment. glory, security and peace it has achieved. We must also mention some of the major steps The story of the oil wealth in Kuwait is much which the Corporation aspires to achieve in the more than just a simple story that we can tell coming fifteen years; the most important of briefly; it is rather, a saga of struggle, heroism which is to increase its productive capabilities and devotion displayed by the people of this up to four million barrels per day and to increase country. Indeed, the oil wealth which God its refining capabilities by building a new fourth Almighty endowed us with has always depend- refinery and renovating its existing refineries. ed upon the laudable efforts of those who have Furthermore, the oil transport sector is being worked in the oil sector for more than fifty years. developed through the building of seven new oil and gas tankers. And it is worth mentioning the It is true that crucial days in the history of huge programs initiated by the Corporation to Kuwaiti oil are numerous and unforgettable, but develop the means of security, safety and pro- the most important of all occurred in January tection of the environment. We would also like 1980, when Kuwait Petroleum Corporation was to highlight the project of the Northern oil fields created and was charged with the management which will add a new dimension to Kuwait’s of the entire oil sector encompassing all the oil productive capabilities. companies and corporations in the country. On the occasion of the Corporation’s silver Today, as we celebrate the silver jubilee of the jubilee, we would like to express our best wish- Corporation, we cannot but express our deep es to all KPC employees and our deep gratitude gratitude and appreciation to all those men and to all our colleagues who have generously con- women who have contributed with their efforts tributed to the creation of this giant Corporation. and devotion to the great success of the We hope that the Corporation achieves great Corporation, enabling it to compete with the progress, success and prosperity, and that its leading petroleum companies in the world. employees and our country may enjoy lasting good fortune, security and prosperity. On this special occasion, we feel proud to recall some of the main achievements of the Corporation. Indeed, the Corporation has been able to ensure training and development for Talal Al Khaled Al Sabah thousands of young Kuwaitis in the manage- Managing Director Petroleum Services ment of this national facility which is, without Editor-in-chief exaggeration, the most important economic sector in Kuwait. The Corporation also employs the most recent and advanced technology as

4 KPC WORLD,JANUARY,MARCH 2005 In this special file, current and former oil leaders express their aspirations and expecta- tions for the future of the Corporation and the memo- rable events and develop- ments during their tenure.

KPC WORLD,JANUARY,MARCH 2005 5 of a subsequent transformational industry. Minister of Oil How do you forecast the Corporation’s future Sheikh Ahmad Al-Fahad Al-Sabah in light of the increasing world demand for oil? “Oil Sector is The increasing world demand for crude oil cre- ates several challenges for the Corporation; the major one facing us today being to increase pro- the Backbone duction to meet this demand. This will be achieved by developing exploration, develop- ment and production work in Kuwait so as to of Kuwait’s Economy” increase reserves and raise extraction rates, by finalizing capital projects such as the crude In his confident calm tone, Sheikh Ahmad Al Fahad Al Sabah, Minister of Energy & Chairman of exportation facilities construction project and by KPC’s Board of Directors, broadly surveyed the strategic directions of the oil sector. He optimisti- increasing exploration , development and pro- cally enthused that the Corporation is going through one of its best phases, which promises over- duction of non-accompanying gas, so that this all prosperity and development. He believes that the Corporation forms the backbone of Kuwait’s gas can be substituted for oil in energy produc- economy, thus it has an immense responsibility to enhance its performance in all realms so as to tion. become an effective contributor to Kuwait’s prosperity. What future plans and projects would you In your opinion, what role does the the following means: like to carry out? Corporation play in enhancing the national 1. Privatizing some of the Corporation’s activi- The Corporation and its subsidiaries have economy? ties: Recently, the Corporation conducted sever- defined the strategic goals, which the Kuwaiti oil The Corporation plays a crucial role in support- al studies on the privatization of its activities and sector aims to realize in the future. The capital ing and stimulating the national economy. One “the possibility of involving the private sector costs for the realization of such goals have been of the most important ways it does this is to with the Corporation’s subsidiary companies in estimated at K.D.16.2 billion over the coming endeavour to provide good investment opportu- whole or in part”. Currently, we are waiting for twenty years. nities for the private sector in the oil industry by the required approvals of the outcomes and rec- ommendations of these studies, so that we may Reaching a production level of 3 million barrels proceed with their implementation. Meanwhile, of crude oil per day by the year 2005, and 4 mil- the Corporation is taking the required executive lion barrels per day (bpd) by 2020 is one of the steps to privatize the oil blending and local mar- major objectives. To achieve this, several proj- keting activities. The oil blending activity has ects will be implemented, some of which have been sold to a private sector company while the already been identified and will be implemented First Local Fuel Marketing Company has been during the coming five years as follows: established and has offered 76% of its shares for public subscription. In addition, steps have 1. Construction of new crude exportation facili- been taken to transfer the whole of the calcin- ties in the Northern and Southern tank farms er coke project to the private sector. The project and at Mina Al-Ahmadi and tanker fuelling facil- tender has been awarded to the Al Mal Group for ities. the production of calciner coke. 2. Increasing the production capacity of 2. Promoting the participation of the private sec- Gathering Centre No. 28, and installing a gas tor in the Corporation’s operations: The private pressure unit and treatment unit for medium sector now participates in the Kuwaiti humidity crude oil in the West of Kuwait. Petrochemicals Compound, and many steps 3. Installing waste water disposal facilities - have been taken to give the private sector a Phase 2, in South-East Kuwait. certain share in future petrochemical proj- 4. Building a new Gathering Centre, No. 24 in ects (such as Olefins and Aromatics), and the Sabriya field, in the North of Kuwait. in construction of the proposed new 5. Increasing the productivity of Booster Station refinery. No. 131 - Phase 2, in the North of 3. Relying on the private sector in Kuwait. the contracting and engineering 6. Drilling a large number of wells in all the works and in the support serv- Kuwait oil fields. ices. 4. Encouraging the pri- Our strategic goals also include raising Kuwait’s vate sector to exploit refining capacity to around 1.0 - 1.3 million bpd the output of the by the year 2010. To attain this level, the fol- Corporation’s activi- lowing projects will have to be carried out dur- ties for the creation ing the coming few years:

6 KPC WORLD,JANUARY,MARCH 2005 required specifications, on economic and envi- Therefore, showing more interest in Kuwaiti a. Developing the current refineries in order to ronment-friendly terms, for all consumers in the human resources, protecting them and regard- boost the standard of transformation State of Kuwait, particularly the Ministry of ing them as the mainstay of the Corporation and processes . Electricity and Water. To continue to procure its subsidiary companies, as well as exerting b. Building a new refinery with a refining capac- such fuel locally will only be possible through efforts to develop their capabilities and skills are ity of 432,000 bpd to meet the future local the creation of additional refining capacity. The all among our top priorities. Generally speaking, energy needs. Construction to be completed by alternative is to import gas from neighbouring there is the capacity to provide job opportunities the year 2009. countries. for the national workforce, and to develop its c. Building a fourth gas liquefaction plant, capacities and technical skills. scheduled to start operating in 2009-2010. I also hope that the Kuwaiti oil industry will attain high standards of performance in all its Is there any message you would like to In order to expand petrochemicals activity inside activities comparable with those of the major address to the employees of the oil sector on and outside Kuwait, the following projects will world oil companies. I hope that KPC and its this occasion? be carried out: subsidiary companies will be able to implement I would like to tell our brothers and sisters who the best and most suitable world standards in work in the oil sector that their work is a bless- The Aromatics Project health, safety and environment (HSE) so that the ing, a catalyst of motion and energy, a source of The second Olefins Project Corporation will occupy a leading position in the production, profits and success and a way The Styrene Project region in terms of performance. It is my hope, toward progress and prosperity. No nation could The Poly-Styrene Project in Asia. too, that the best and most suitable modern rise again without the efforts, perseverance, technology will be used in all the Corporation’s struggle, energy, faithfulness and devotion of its These projects are expected to come into serv- activities. citizens. Indeed, the noble soul cannot tolerate ice during the fiscal year 2007-2008. laziness, so let us all join our efforts and work, My view of KPC in the future is that it will con- each in his or her field of work so that when har- What are your wishes for the long term tinue to make a huge contribution to the devel- vest time comes we will reap the fruits of our future of the Kuwaiti oil industry? opment of the local economy by providing good work, and God Almighty shall always reward the As you all know, the oil sector is one of the investment opportunities for the private sector. assiduous workers. country’s vital sectors and the mainstay of the national economy. Indeed, the future of the It is worth mentioning that the Corporation, even I would like to add that human resources are the country largely depends on the future of the oil as it expends its best efforts to achieve its goals, basis of work in any field; indeed, without the industry. will face many challenges, although I am sure it human being, no machine can operate, no life will overcome them all. The major challenges can function. The human being is the real Therefore, we look forward to seeing the are: engine in life. This explains the great interest we Kuwaiti oil industry achieve more success and have in human resources, particularly those of prosperity, and attain the position of promi- * Exploration and production activities in Kuwait: the oil sector whose yields are the basis of the nence that it aspires to in the Gulf region and in To obtain the approval of the National Assembly developmental plans in the present and future the world. This will not be achieved , however, for the Kuwait Project by which world oil com- life of the country. unless the Kuwait Petroleum Corporation is able panies will be called to assist Kuwait in its to pursue all its strategic orientations and reach exploration, development and production activi- The workers in this sector have always been the the goals which have been established for the ties in order to increase reserves and raise source of our interest and one of our top priori- coming period. These major goals include: extraction rates, to expand exploration, devel- ties, particularly in the time when I was the act- opment and production of non-accompanying ing Minister of Oil before taking charge of the 1. To reach the targeted crude production rate gas, and to deal with the quantities of water Ministry of Energy. of 4 million bpd by the year 2020. which come with the crude oil, and the quanti- 2. To increase the country’s refining capacity to ties of heavy oil produced in the future. For these reasons, we have devoted our efforts around 1.3 million bpd with a high trans- and time to resolving the chronic problems from formation process level by the year 2010. * Refining activity in Kuwait: which they were suffering all those years. In 3. To expand the petrochemical industrial activ- The rapid change in the standard specifications spite of the difficulty and costs of these prob- ity inside and outside Kuwait. of oil products will require further capital invest- lems, we managed, with the guidance and help 4. To reach a minimum production level of ments until these specifications are met. of Allah, to overcome those difficulties within a 100,000 equivalent barrels of oil per day for relatively short time and succeeded in filling the our exploration and production activities outside * The petrochemical activity: hearts of all our personnel with joy and satisfac- Kuwait by the year 2010. The lack of available natural gas in Kuwait tion, and I hope that this will be revealed in the 5. To expand the refining and marketing activi- which can be used as a source of energy in the rates of production and the performance level, ties outside the State of Kuwait and raise petrochemical industry is an impediment to the and in increased interest in performing their the standard of these activities to the highest of expansion of this activity inside Kuwait. duties which are a precious trust, as I stated the global oil industry. earlier. So let every one of us ren- Last but not least, I would like to mention that all der the trust he is in charge of We should not forget that the Kuwaiti oil indus- these wishes and aspirations cannot be with total loyalty and devotion. try provides the most suitable fuel with the achieved without the valuable efforts of our country’s qualified and experienced citizens.

KPC WORLD,JANUARY,MARCH 2005 7 while it has several foreign activities ongoing at one time, its policy involves reorienting such investments once in a while. Reorientation takes place after sensing the type of the existing for- eign investments and how strong and profitable they might be. As a result, some markets become the centre of KPC’s attention and some Hani Abdul Aziz Hussein others are left behind. Hussein added that KPC has increased foreign investments in the petro- chemicals industry in Europe and Nrth America, “KPC is Up to Great Challenges, Canada in particular, by collaborating with Dow Corporation, and undertaking exploration and Greater Opportunities” production activities through the Kuwait Foreign Petroleum Exploration Company (KUFPEC).

He added that KPC has its eyes on the Eastern Hani Abdulaziz Hussein, Chief Executive markets. Some of the potential spots ready for Officer, said that the Corporation will face investment are being tested. This is to guaran- great challenges down the way. However, it tee the creation of new opportunities and ven- also has greater growth opportunities. He ues for crude oil and ways to market Kuwaiti oil affirmed that the oil industry is expected to products. keep booming at the same pace as seen today for the coming few years. Performance As to his expectations and wishes, Hussein in the refining, petrochemicals and trans- commented: “I hope that KPC succeeds through portation sectors will keep developing. establishing itself in the major markets, in a way Consequently, it is the best time to increase to be, not only a provider of crude oil and oil its profitability. products but a market operator as well. I hope it can build marketing facilities to keep the sale of “Locally, KPC has set a strategic plan to carry local products and crude oil going”, pointing out major projects across all oil sectors which that the Far Eastern countries are the future include: enormous exploration and production giants of oil production expansion. projects within Kuwait, and projects with foreign companies’ assistance to develop the Northern “I wish as well that the Corporation continues to oilfields. Plans for these projects will soon be create job opportunities for the Kuwaiti youth presented to the National Assembly. We also and to develop and train its local staff, whether intend to build a fourth refinery and upgrade the fulfil its role by taking part in the petroleum within its subsidiaries or across the other com- existing refineries. We will launch the new the activities and contributing to the economic panies of the oil sector.” Olefins and Aromatics Complex Project in the boom, through engineering, construction and petrochemicals sector and purchase a number contracting or offering the variety of services of oil and gas tankers in the transportation sec- needed. This will help spur the pace of the In conclusion, Hussein addressed a grateful and tor” he added. national economy.” appreciative note to the founders of Kuwait’s oil industry, and to all former ministers and lead- Hussein pointed out that the greatest challenge Hussein emphasized that HSE is an increasingly ers, who served the Corporation and put the KPC is facing presently is to keep moving on the urgent and serious matter at the national, sector on a firm foundation in a very profession- same track and to maintain its distinctive per- regional and international levels. For KPC, HSE al way across all oil domains, in addition to formance. Implementing the major projects will is an important goal and KPC has duties to fulfil establishing KPC and assigning work in an not be an easy task. However, Hussein added,” in this respect: improving the environmental organized way. KPC is fully set to achieve all of its ambitions.” conditions locally via the existing oil facilities across the production, refining and petrochemi- He also thanked the oil sector employees for The CEO said that KPC seeks more involvement cals sectors. KPC has also to enhance its per- their concerted efforts, pointing out that the cor- from the private sector. KPC has a history of formance within the environmental activities it poration rendered a great output this year and successful joint ventures with the private sector handles locally, or what is called, Safety that the financial outcome will be excellent by such as the partial privatization of fuel stations, Performance. the end of this year throughout all the sectors. the calciner coke project, salt and chloride Huge missions are waiting down the road as plants and finally the petrochemicals projects. As to KPC’s orientation regarding its foreign well as potential projects, which need coopera- “Under the decree of the Supreme Petroleum investments, some of which, such as the fuel tion and extra efforts and coordi- Council, KPC is working on getting the private stations abroad, KPC seems to be cutting down nation among all sectors to sector involved in building the fourth refinery. on, Hussein stated that KPC does not intend to achieve the desired objectives. This will give the private sector an opportunity to dispose of its foreign investments but rather that

8 KPC WORLD,JANUARY,MARCH 2005 Sheikh Ali Al Khalifa Al Sabah Tangible Role in Restructuring Oil Sector, Establishing KPC Minister of Oil 16th Feb. 1978 -12th June 1990

In Kuwait’s oil history, there is no doubting from 1968-1973. He was assistant years, he had completed the restructuring of the role of Sheikh Ali Al Khalifa Al Sabah, the Undersecretary from 1973-1975, during the the Kuwaiti Oil Industry, and formed Kuwait man who became the nation’s second difficult time of the Arab oil embargo after the Petroleum Corporation. Then he went down- Minister of Oil and the face of the industry at October 1973 War, and then the inaugural stream abroad, building a truly integrated and home and abroad for a dozen years. Undersecretary of the Ministry of Finance to international oil conglomerate years ahead of February 1978 following the split into two other Gulf counterparts. Educated to secondary level at Cairo’s presti- separate Ministries. He was also Kuwait’s gious Victoria College, and then with a BSc in representative at OPEC. After leaving the oil portfolio in June 1990, Economics from the University of San Sheikh Ali served as Minister of Finance until Francisco, (later earning a University of Then six weeks after His Highness the Amir April 1991, mostly during the dark days of the London Masters in Economics), Sheikh Ali Sheikh Jaber Al Ahmad Al Jaber Al Sabah Iraqi occupation of Kuwait, before entering headed the Economic Department of the then assumed power in January 1978, Sheikh Ali private business. He was the Chairman and combined Kuwait Ministry of Finance and Oil was appointed Minister of Oil. In less than two Managing Director of the Kuwait Real Estate Bank from 1998 to 2000.

KPC WORLD,JANUARY,MARCH 2005 9 Dr. Rasheed Al Amiri

“KPC Should Find International Partners, globalization trend which has two essential caus- Allies to Move Ahead Boldly” es: moving swiftly, bringing in new ideas, and competition.” Minister of Oil On his wishes for the future of the oil industry in Kuwait, Al Amiri said: “ I wish that the oil industry 20th June 1990 - 20th March 1991 in Kuwait becomes an attractive area of employ- ment for the Kuwaiti youth in all fields of special- Dr. Rasheed Al Amiri had a short term as should move in big steps now. Formerly, an eco- ization. Young people should be trained to master Minister of Oil, but he handled the oil sector nomic school of thought believed that the strong the oil production know-how and all aspects of the during the most difficult time for Kuwait. Dr. Al eats the weak, now the common sense says: the Kuwaiti industry. This is being done now, but we Amiri, took charge of the Corporation during fast topples the slow even if the fast might be want to have more opportunities for all because oil the critical time of the Iraqi occupation of smaller than the slow. I guess that there should is the backbone of our economy. Kuwait. be some change in the corporation’s strategic I believe that we in Kuwait, lack a real oil-related education . We do not make room to educate peo- “By the time I became minister, things were quite ple about oil matters. I, personally, have suggest- harsh. That is a historical time quite different to ed two ideas to narrate oil’s story in some appeal- any of the terms of my colleagues, the other chair- ing way through the media. It can be made as car- men. The cabinet I was part of, was formed 40 toons to tell the history of Kuwait’s oil, from the days before the Iraqi invasion of Kuwait. I opted to technical and political perspectives, to tell how oil have my workplace at the Ministry instead of the and energy were found and the role of oil at the Corporation’s headquarters. When I came into my international level...all in a pleasant and interest- office at the Ministry premises, I found it deserted. ing way. I made a comprehensive study for that in None of the former ministers had used it before. the hope of producing and presenting it across the Overall, my term as chairman of KPC seemed to Gulf countries. The Corporation can undertake this be short since I was busy with my ministerial and project because it implies a new idea and a big technical tasks to dispel the wrongful claims of one at the same time. Many people know nothing the Iraqi regime, I had to do negotiations and tours about oil and are not aware of the corporation’s to make the Kuwaiti position clear. I frankly tell role and about the efforts and processes involved you that I had only one meeting, which lasted a in producing and refining this vital commodity. mere 10minutes, with the corporation’s leaders. I This is a vague subject for them.” had to leave because I had another meeting with If ever he had the chance to become oil minister Mr. Hisham Al Nazer, the Saudi oil minister who again, Dr. Al Amiri emphasized that he would was on a secret visit to Kuwait at the time. The focus fully on the Kuwaiti youth. “If I have to com- period preceding the invasion was full of critical ment here, I’d say that the oil wealth is vital and developments. After the invasion, and after the thinking in order to decide and move swiftly and to self-renewing, just as the human wealth is. I’d corporation had moved to Taif, I remained in close keep up with the trends of globalization which rely move in that direction. When Kuwait was invaded, contact with the KPC leadership from the moment on new ideas and ways of thinking. It should be when the land and people were stormed, there it started operating from London and it got to backed up by the big economic blocks. The was only one element to ensure a new and more regain most of its key players and staff. I would Corporation should now find international partners honourable beginning: People, the human ele- consult with them round the clock on technical, and allies. Without them it cannot move ahead ment. That’s why we should focus on our youth. management and financial matters related to the with confidence. No economic activity is strong on Youngsters are feeling lost. The Corporation must projects being carried out abroad. I used to fly to its own. We know that there are many competitors support the national causes. I’ve been to Malaysia. London to discuss plans with the key players to out there, and KPC faced many obstacles because The oil corporation makes a large contribution to reorganize the oil sector and to put out the fires it was left alone. This urged others to compete education back-up and it has a huge centre to set by the Iraqi invader. We used to anticipate with it. The international economy is now led by educate people in matters related to oil. For this events and negotiate with the American and the large blocks and not those little scattered purpose , it has built universities and research Canadian companies specialized in putting out companies.” centres and is playing a great role in developing fires, on the possible burning and explosion of the Asked about his view of the corporation’s future and guiding the Malaysian society. I wonder why wells. The corporation had saved the government in light of the current international economic we do not do the same thing here? I guess that financially through its assets abroad. The corpora- developments, the former minister pointed out the young people deserve to be looked after and taken tion’s offices in other countries with no Kuwaiti importance of establishing a strategic centre to interest in. The Public Authority For Youth and embassies, were ambassadors of Kuwait there. study the role of oil in the economy in the long run. Sports does not give much attention to the issues The offices were supporting Kuwait’s cause in The ministers alternatively take charge of the min- that are important for our young. It rather focus- those difficult times .” istry. There should be a constant institutional sci- es on sports. Our young are lost, Al Amiri expressed his belief that the privatization entific system based on studies. Otherwise, the with no guidance, no information. It of the oil sector should be speeded up. “I think corporation will not be able to compete against the would be wise for the Corporation that this has already started at the retail fuel sta- bigger companies. Others in different countries to play such a role in the service of tions. Decisions have to be made quickly and we are being largely developed in a way to match the our future generations. “

10 KPC WORLD,JANUARY,MARCH 2005 extracted oil barrel contains around 500 cubic Dr. Homoud Al Rgobah feet of gas. Consequently any increase in oil production, leads to an increase in gas produc- “KPC Lent Humanity Great Service by Putting out Oil tion. A 4 million oil barrel capacity will bring about 2 billion cubic feet of gas. We should con- Fires in Record Time” sider a way to promote and extract this huge quantity because burning it would cause a tremendous amount of pollution This suggestion Minister of Oil should be considered seriously in the light of the 20th April 1991- 7th Oct. 1992 fact that our power generation stations are fuelled by crude oil, gas oil and gas and could instead be fed with the gas which is a by-prod- With tenacious confidence and pride in KPC, uct of the oil production process.” Dr. Homoud Al Rqobah, former Minister of Oil & Chairman of KPC’s Board of Directors, laud- Dr. Al Rqobah expressed the hope that high tech- ed KPC’s role and pointed out how paramount nology, particularly oil extraction technology be and effective it is, in terms of spurring the imported to Kuwait. “I should add that increasing national economy. KPC’s services, according the production has much to do with the use of a to Al Rqobah, were in no way limited to new technology, one that is owned by other com- Kuwait, having transcended the country’s panies. I hope as well for more development of borders. KPC saved the world from a real our petrochemical industry. I hope that our petro- environmental disaster by putting out the oil chemical industry will enter new, profitable fields fires caused by the Iraqi invader shortly after in the future.” the liberation of Kuwait. Dr. Al Rqobah emphasized that he would do any In answer to the Corporation’s role in enhancing thing in his power toward enhancing production the national economy, Dr. Al Rqobah said, “KPC efficiency if he was once again put in charge of plays a key role in marketing oil which is the the oil sector. He added “as is commonly known, backbone of the country’s economy. Oil accounts we extract 50% out of oil from our wells and for 95% of our national income. Hence, the leave the rest as reserves. When we say that Corporation’s role is not only effective, but criti- Kuwait’s reserve is 100 million barrels, it means cal, in keeping the wheel of the Kuwaiti economy the quantity we can extract with the technology turning.” funds for money is like snow, if it stands still, it we posses is only 50 million barrel. We’ve got to melts away. There’s an abundance of money increase our production capacity by up to 10%, In evaluating his term as Chairman of the supply at the moment, especially after oil prices or at least 5% if possible, because it would mean Corporation, Dr. Al Rqobah stated, “I took charge skyrocketed recently. I assert that KPC now has 20 billion barrels, or US $ 800 billion.” of the Corporation under very unusual circum- a double role: to handle oil production, increas- stances. At the time the oil well fires were still ing production on one hand, and investing the “I hope that we will be able to develop oil reser- raging and threatened reservoirs. The entire oil surplus funds, on the other. According to experts’ voirs in order to increase their productivity. industry of Kuwait was at risk and KPC had to forecasts for 2015 through 2020, there will be lit- Developing the northern fields is very critical. I undertake an overwhelming job. All plans, direc- tle oil in the world outside the Gulf (GCC) coun- was the first to propose this idea, which is based tions and implementation were coordinated and tries and Iraq, and oil production in the rest of the on setting a strategy for our Northern borders and controlled by KPC, in cooperation with the other world will be negligible. It is common knowledge the production of larger quantities from the North companies within the oil sector. KPC saved the now that 67% of the world’s reserves of oil exist fields with help from other countries. We have world from a huge environmental disaster. We in the Gulf countries and Iraq. This is a really the experience and those countries have the completed the job in seven months, and this huge quantity. I guess that this percentage will capabilities because they spend billions of dollars ensured that the damage to the reservoirs was be even higher by the time the wells of other pro- on research every year and possess modern kept to a minimum and hazards from toxic gases, ducers go dry. I believe that the Corporation technology. It is my hope that the Northern fields particularly those resulting from the burning of should draw a clear strategy for it might be called project will be started soon, because 12 years of such elements as Nickel and Penydene, which upon to meet global demand which it can only do indecision and procrastination are enough. I can cause kidney diseases and failure, particu- by increasing oil production.” talked about my idea when I was larly in young children, were eliminated.” still a minister in 1992. I support- He added that he expects that Kuwait’s capacity ed it as member of the National As to the Corporation’s future he said,” currently, will reach 4 million bpd in 2015 as a result of Assembly because it serves the world demand for oil is rising steadily, KPC is world demand. “KPC also should turn toward interests of the country”, Dr. Al required to increase oil production and invest expanding the exploitation of natural gas. Each Rgobah concluded.

KPC WORLD,JANUARY,MARCH 2005 11 world class competitor. By seizing this opportunity and developing its capabilities, KPC would be able Ali Al Baghli to elevate its performance using modern technolo- gies and cutting costs which would enable it to compete better in all areas. I think that the compe- “Collective Effort, Patriotism Helped tencies within the Corporation enable it to perform in the desired manner, provided there is no politi- Overcome Difficult Situations” cal interference, or bureaucratic hindrances.”

Minister of Oil As to his expectations for the Corporation’s future, th th Al Baghli said that KPC is a major government 17 October 1992- 8 April 1994 company with a huge financial surplus. In the past, it used to put this aside for rainy days, such as for the rehabilitation of oil installations. Today, KPC’s He believes in collective action and teamwork. financial status helps it make the right decisions He believes that the Corporation’s accomplish- independently. KPC has its own budget and no ments are achieved thorough the patriotic longer has to refer to the government or the sense of all KPC personnel and gratitude goes National Assembly to raise funds for its projects. It to all rather than to one. This is how the former is financially self-sufficient. I think that the tremen- Minister of Oil & Chairman of KPC’s Board of dous technology developments that have taken Directors Mr. Ali Al Baghli, expressed his opin- place in the past decade have turned everything ion of the Corporation. upside down, in a positive way. KPC has to make a giant leap ahead and boldly compete with the oil When asked about the Corporation’s role in boost- majors which the Corporation always regarded as ing the national economy, he said “the its competitors like the “Big Seven” companies.” Corporation’s operations account for more than 90% of Kuwait’s national economy. The “As a former member of the Corporation, I have Corporation is the producer, the carrier and the always held that aspiration steadfast, even if I trader on the local market. That is why the could not achieve it during my term. I am very real- Corporation should implement best management istic and I am aware that it is difficult to achieve. practices the way similar companies abroad are However, one should always remain hopeful and managed. The national company is the Corporation optimistic of better things to come in order to given that Kuwait’s economy relies almost entirely progress ahead. On the other hand, detractors who on KPC’s production. KPC’s staff should have some say that improving the situation is an impossible insight on the country’s future economy to expand feat will surely tumble down themselves.” the scope of benefits from the oil wealth and all the behind this impressive accomplishment. This major associated industries.” allowed the Corporation to weather the storm and When asked what would top his list of priorities if return to its pre-war position. I take great pride in he were asked to take charge of the oil sector Al Baghli believes that although “KPC has estab- the achievements of that period and I believe that again, he promptly replied that he would give pri- lished EQUATE Company and is currently moving the success of the Corporation is a result of collec- ority to proceeding with Project Kuwait to develop toward establishing EQUATE 2, this remains not tive work. KPC operates on a wide, multi-discipline the Northern fields. “This idea was first conceived enough. The petrochemicals sector is potentially basis, employing more than 13,000 people across during my tenure. We have fields like Burgan, huge and multidimensional and can yield huge its network and it has the best management Ajuzza and others that have reached their limit. financial returns. Many do envy us for pricing the expertise, engineering and technical personnel of Since Kuwait’s economy relies on oil, it has to seek one oil barrel at $40 to $50, although we could the highest calibre, and teams of young and old other sources of income so it follows the oil wealth achieve higher returns if we processed our crude experts, each of which is specialized in its own should be a subject for research. We possess the oil further.” field.” oil in our reservoirs and all it needs is advanced technology. We should go further with this project, Reflecting on his term as Chairman of the Al Baghli expressed the hope that KPC would seize on a transparent basis. I recall that I was the first Corporation, Al Baghli said, “I took charge of KPC the opportunity of high oil prices to develop its to propose this project to His Highness the Amir. from 1992 through 1994. It was a busy, exciting capabilities and sharpen its competitive edge His Highness advised that we should go ahead. We time, vibrant with business activity. At the time, against international oil companies. “KPC and formed a committee of the Corporation’s senior Kuwait was still recovering from the wreckage other oil companies are extremely pleased with the staff and from the subsidiary companies. We have brought about by the Iraqi occupation and we had current soaring demand for oil, which incidentally made some progress but the project has not come to start from scratch, especially at the production is at its highest level ever. The Corporation is kind to the fore yet. Politics is all around it. When I was facilities level. 70% of the country was in ruins. of a contractor for the government, it provides its a Minister, I treated this project But, with the grace of God, everything was back on services, and receives a share in the returns. with transparency. This wealth is the right track again to what it was before August Hence, the Corporation must grab this golden for all Kuwaitis; it has to remain so. 1990. The collective teamwork and the patriotic opportunity to develop its capabilities in order to Thus we should allow no one to sense of the Corporation’s staff were the impetus attain the standard of oil majors and become a undermine this situation.”

12 KPC WORLD,JANUARY,MARCH 2005 Dr. Abdul Mohsin Al-Mude’j “The Future Impels Kuwait to Increase its Production Capacity as soon as Possible”

Minister of Oil 13th April 1994 -2nd Sept. 1996

Although, Dr. Abdul Mohsin Al-Mude’j’s term developing countries such as China and India. as Minister of Oil & Chairman of KPC’s Board Both of them have started to industrialise and of Directors was short, he stirred up several achieve very high economic growth rates which projects within the oil sector, foremost among will be translated into higher demand for oil. I which was EQUATE I. guess that the future impels Kuwait to increase its production capacity as soon as possible. The For him, EQUATE I is an economically success- present Kuwaiti oil production capacity is 2.4 mil- ful and vital project for an oil-based country lion bpd. In light of the worldwide growth, Kuwait like Kuwait. He says he wishes to see more should increase its production capacity within the industrial projects which can support the next five years to at least 3 million bpd. With such national income and create more employment capacity, it can cater for the worldwide demand opportunities for young Kuwaitis. for oil. Kuwait and the neighbouring Gulf countries have a huge supply of oil, a commodity that the Asked about the Corporation’s role in keeping the entire world cannot do without. national economy’s wheel turning, Dr. Al-Mude’j The oil revenues should be invested inside said “the Corporation’s role is paramount and Kuwait. If we ever want to develop this country in effective in keeping the national economy’s wheel terms of industries, the best way is to develop our moving and oil is the vital element. Kuwait has to oil industry. This would help to pump additional be distinctive, to stand apart from others through income into the country. We cannot rely on crude its oil production in the first place. Yet, Kuwait’s oil for ever. We have to diversify our industrial national and vital projects were limited and had We carried out a number of other oil projects, sector, thereby transforming Kuwait into a major only started with some petrochemicals projects ones that have to do with the oil gathering cen- business centre, especially as we have all the like EQUATE I, and the current EQUATE II, the tres.” He described the EQUATE I as “success- financial, technical and geographical resources. olefins and aromatics plants, all of which depend ful”venture, having cost $US 1 billion, and at We should take advantage of the increased oil mostly on oil.” present it is valued at $US 4 billion. production capacity and the ever rising prices to He added that “today, we are all called upon to put the oil industry on the move.” expand the industrial basis in a way to cover the He says he is proud of the Corporation’s person- intermediate industries. This can build new work nel, “I worked with several people who have all About his wishes for the Corporation’s future, Al- opportunities and an additional source of income. my respect. All of them had a major role and a Mude’j said, “I wish we could have clear, careful- In my opinion, the Corporation’s role should be long experience in the oil industry. The truth is ly considered plans that result in enacting some quite pro-active. Except for the chemicals part; they were of a great help for me while I was part laws to encourage and facilitate capital invest- there are many proposed projects that have not of the Corporation and its projects. My role was, in ment. Laws, capital and oil are available but we yet come to life, they are stumbling, in slow the first place, supervisory, in a way. Yet, with the have to spur the underlying mechanism. I hope we motion and were not extensively launched. We grace of God, things were moving. At present, can see Kuwait emerge as a major oil business should give these projects some more interest in some of the projects we laid at the time are being centre, and a centre for intermediate industries.” order to safeguard the oil industry and guarantee re-launched. The project of increasing oil produc- the oil supplies.” tion by 2005 is one example. These projects faced When asked what his priorities would be if he numerous obstacles at the time.” were ever put in charge of the oil portfolio again, As to his impressions and evaluation of his term he readily said “ I would expand the oil industry as as Chairman of the Corporation, Dr. Al-Medej says As to his vision for the Corporation’s future, espe- a major support to the national income, thereby “I was the Minister of Oil for thirty months. I cially after the increasing world demand for oil, ensuring a safe future for our chil- believe that this is a relatively short term but I he thinks that the increase in the global demand dren and their children, create managed to stir up a number of projects during for oil will be around 1 million barrels per year. more employment opportunities that period, EQUATE I is an example. I am hon- Such a rate should be taken into account, but for Kuwaitis and diversity our oured to be the one who laid its foundation stone. recently, an unusual growth is being sensed in the sources of income.”

KPC WORLD,JANUARY,MARCH 2005 13 Issa Al Mazidi “I hope Kuwait Project is Accelerated so the Corporation Benefits from International Expertise”

Minister of Oil 15th Oct. 1996-16th March 1998

crude oil and petroleum products, thereby In his characteristic down to earth manner, quenching the consumers’ thirst for this vital Former Minister of Oil & Chairman of KPC’s commodity and fuelling world economic growth Board of Directors, Issa Al Mazidi says that within its capabilities while at the same time ful- the Corporation is steadily working to imple- filling Kuwait’s commitment towards the other ment its strategic plans and expand opera- OPEC members when it comes to the set pro- tions locally and internationally. He added “ KPC has, since its establishment, been guid- duction quotas. “I, therefore, expect KPC to con- that the Corporation was founded with the ed by a number of clear plans and strategies. All tinue to play a leading role in meeting the con- aim of managing and facilitating all oil activ- of KPC’s key players, including myself, have sumer markets’ needs in the future.” ities and facilities for commercial purposes always implemented those plans and strategies and was fully owned by the State. KPC is the designed to achieve short and long-term tar- As to his future expectations for the Corporation major artery of the Kuwaiti economy; oil gets. Among the plans and programs I took part and what it should do, the former Minister said, being Kuwait’s key resource. As such, the in, and which my colleagues and I sought to “on the whole, the industry is developing con- Corporation can contribute to, back up, acti- bring to fruition are: the oil reservoirs explo- tinuously and rapidly and there are constant vate and boost the national economy; devel- ration and development programs, the con- developments in technologies, applications, op the labour force and create new employ- struction of gathering centres and the on-going performance and productivity methods. ment opportunities for the coming genera- process of modernization and maintenance, Matching such evolution and adopting the latest tions. developing the refining and global and local systems and technologies, using and imple- marketing facilities in order to keep abreast of menting the latest and best solutions in oil oper- Al Mazidi believes that KPC’s main role is not lim- the increasing world demand for oil and ations and the petrochemicals industry is a ited to local operations of petroleum exploration, derivates, and, finally, emphasizing the impor- must. This should be considered in any future production, gathering, refining and marketing, but tance of training and safety programs.” project the Corporation intends to carry out, extends to include expanding the oil industry and whether a new project or an existing one under all associated activities abroad. The strong com- As to the current role of the Corporation, Al development. I hope that KPC benefits from the bination of KPC’s domestic and foreign affairs Mazidi pointed out that KPC has, since the international expertise, and the advanced sys- gives it a major, unique and paramount role in beginning, been working steadily to enhance its tems and technologies in the oil industry; and spurring the overall national economy. performance and to expand its wide range of that the development of the Northern oilfields activities both locally and overseas. KPC seeks does not come late, in order to With respect to his role as Chairman of the to maintain the supply of energy to the interna- achieve the maximum revenues Corporation’s Board of Directors, Al Mazidi said tional markets in order to meet demand for from the Kuwaiti oil wealth.”

14 KPC WORLD,JANUARY,MARCH 2005 Sheikh Saud Al Sabah Pioneering Role, Dynamic Performance Minister of Oil 22nd March 1998 - 13th February 2001

After 32 years of public service to his country in In 1975, Sheikh Saud was appointed Ambassador In October 1992, Sheikh Saud entered the Kuwait diplomacy and politics, Sheikh Saud Nasser Al of the State of Kuwait to the Court of St. James Cabinet as Minister of Information, a post he held Sabah remains actively involved in Kuwait domes- (UK) and concurrently, non-resident Ambassador until March 1998. During his tenure, he developed tic and international policy. He frequently lectures to Norway, Sweden and Denmark, a position he Kuwait’s worldwide information and media on issues important to Kuwait and serves in advi- held until 1980. resources and oversaw the establishment of sory and other roles, including as a special emis- regional offices in several world capitals. sary to His Highness the Amir of the State of In 1981, he presented his credentials to President Kuwait and as a member of the Supreme Reagan as Ambassador of the State of Kuwait to Following a Cabinet reshuffle in March 1998 and Development Council, an economic and social pol- the United States of America. He was also, concur- until February 2001, Sheikh Saud was Minister of icy development committee headed by His rently, non-resident Ambassador to Canada and Oil and Chairman of Kuwait Petroleum Corporation. Highness the Prime Minister of Kuwait. Venezuela. Sheikh Saud oversaw the development In this position he worked with fellow producing of US-Kuwait relations during turbulent times in nations to stabilize the world’s petroleum market After completing his studies as Barrister at Law the Gulf, beginning with the Iran-Iraq War in the and stimulate worldwide economic growth. He also from Gray’s Inn, London in 1968, Sheikh Saud 1980s when Kuwaiti tankers were targeted by Iran. championed privatization programmes in the joined the Legal Department of the Ministry of Kuwait oil sector. During his tenure as Minister of Foreign Affairs. He represented Kuwait at the Immediately following Iraq’s invasion of Kuwait on Oil, Sheikh Saud made a key contribution to the Conference on the Law of Treaties in 1969. 2nd August 1990, Sheikh Saud became the princi- history and development of the oil industry. He laid pal voice for Kuwait in the international media and the foundation stone of the new oil complex, From 1969 to 1973, he represented Kuwait on the within the United States. His frequent lectures and improved the performance of the oil sector and Seabed Committee of the United Nations appearances on television on behalf of Kuwait’s gave impetus to the Kuwait Project to develop the Conference on the Law of the Sea and was elect- cause became the hallmark of his diplomatic north oil fields. ed Vice Chairman of the Conference. career.

KPC WORLD,JANUARY,MARCH 2005 15 Dr. Adel Al Sabeeh KPC Provides 95% of National Income, 10% of Jobs Minister of Oil 14th February 2001 - 14th February 2002

With great self-confidence yet noble modesty, Sabeeh said: “Due to the financial wealth and to Dr. Adel Al Sabeeh talked to “KPC World” mag- the size of the Kuwaiti production of oil compared azine about the role played by Kuwait to the number of citizens, I am confident that the Petroleum Corporation in the national econo- Corporation will maintain the margin of success it my, and the period during which he was guid- is achieving now, and at the same time it will ing this Corporation in his capacity as Minister achieve better success by working on a good com- of Oil. He expressed his best wishes for the oil mercial basis. sector and its employees and emphasized, dur- ing the interview, that the Corporation plays a Concerning Dr. Al Sabeeh’s aspirations and wish- crucial role in stimulating the national econo- es for the future of the Corporation, it is necessary, my whether in terms of income, employment or he says, that the Corporation works with great investments. with a system of rewards, penalties and discipline. competence and high performance and that vital This way, it would become a Corporation which projects be proposed and approved swiftly and Dr. Al Sabeeh said that the financial yields pro- takes its decisions swiftly and efficiently and efficiently in order to grasp the investment oppor- cured by KPC’s companies represent the biggest insists on employing only competent individuals.” tunities in the oil sector. It is also important to source of income in the country, it is the largest involve the private sector, to give it more opportu- non-governmental employer and the premier He added that there are many advantages which nities for participation and to allow it to play a larg- source of capital projects. “If we go more into characterize the Corporation, but there are still er role in the oil industry with a view to developing details, we find that the Corporation contributes up several disadvantages.“The advantages outweigh it further and to creating new businesses related to to 95% to the Gross National Product by selling the disadvantages since there are many qualified, the industry. He also asserted the importance of crude oil or oil products, and provides more than highly competent young people with a great devo- allowing further investments in the fields of refin- 13,500 jobs representing more than 10% of the tion to working in the Corporation. Besides, the ing and petrochemicals so that Kuwait becomes a total number of jobs in the country. The sheer size Corporation is very qualified to work at a high level world center for petrochemical products. of the funds invested in the Corporation is estimat- of efficiency, to diversify production and to reduce ed at $ 13 billion, and the value of the projects pro- costs in a way which achieves considerable profits Dr. Al Sabeeh expressed his deep gratitude to all posed every year amounts to around KD 500 mil- for the country. Thus, the Corporation is qualified those who work in the oil sector and said that he lion, while the total size of projects under execu- to be at the forefront of the private sector, to guide had worked with some of them and realized their tion is estimated at around KD 4 billion.” this business, to play a crucial role in developing high loyalty and devotion to work. He added “this this sector and opening new horizons for it, to have filled me with pride and comfort for the future of He added “I really feel proud to have worked in this international dimensions in several fields related to this sector, and I would like to say to those work- giant Corporation. The idea of creating KPC in the oil sector and to ensure considerable financial ers that the oil sector is indeed the vital mainstay 1980 was truly a pioneering and intelligent idea. revenues for Kuwait.” of the country and that they are The aim then was to liberate the oil sector from the entrusted with this unique wealth. I method and management of governmental depart- also hope that they will safeguard ments and facilities, and to introduce new man- With respect to the future of the Corporation in light this wealth and develop it further to a agement methods based on commercial principles of the increasing world demand for oil, Dr. Al high standard of competence.”

16 KPC WORLD,JANUARY,MARCH 2005 ble for the exploration development and pro- duction of hydrocarbon reservoirs within the State of Kuwait. The Company also pursues exploration and development of its reservoir interests in the Divided Zone through joint operations. KOC is also involved in the stor- KPC: age of crude oil and delivery to refineries and tankers for export. KOC manages all the oil fields in Kuwait. The largest is the Great Energy Conglomerate with Burgan oilfield, which also is the second largest oil field in the world.

Diverse Activities Kuwait National Petroleum Company Kuwait Petroleum Corporation is universally The group is actively involved in every step of Kuwait National Petroleum recognized as one of today’s top ten oil ener- the oil and gas industry, from discovering Company (KNPC) was estab- gy conglomerates, and a leader in providing reservoirs to delivering clean, safe fuel to the lished in 1960. It manages the safe, clean energy to the global markets. It world’s motor vehicles, airplanes, ships, even three refineries at Shuaiba, Mina was first established in 1980 in order to bring farms and power stations. It also provides Ahmadi and Mina Abdulla, and locally together all state-owned elements of the many of the base petrochemicals so neces- markets the refined petroleum and gas prod- Kuwait oil sector under one corporate umbrel- sary to the materials of the modern world. ucts. Pipelines carry fuel from the three la. Today, KPC oversees a fully integrated KPC supports its international business refineries to the two depots, one in Sabhan industry with operations on six continents. through its worldwide regional marketing and the other at Al Ahmadi. The Company KPC is a diversified energy Corporation, offices from Houston to London to Mumbai, also manages and supplies the local petrol encompassing all aspects of the hydrocarbon Pakistan, Singapore and Tokyo. station network. industry, from onshore and offshore upstream exploration and production Exploration, Drilling & The Company’s three refineries produce: through refining, marketing, retailing, Production unleaded gasoline as well as leaded gasoline, petrochemicals and marine transporta- gas naphtha, domestic kerosene and jet fuel tion. Kuwait Oil Company(KOC) kerosene (ATK) gasoil, fuel oils and other by- established in 1934 is responsi- products such as sulphur, petroleum coke and bitumen.

Mina Al Ahmadi Refinery consists of the Liquefied Petroleum Gas (LPG) plant, which is comprised of three trains for the extraction of propane, butane, natural gasoline and lean gas. Mina Abdulla Refinery includes the petroleum coke producing facilities. Shuaiba Refinery consists of the lube oil blending plant. The lubricants produced are marketed under the brand name Kuwaitoil.

Pipelines from the refineries carry naphtha and sulphur to PIC, jet fuel to KAFCO, liquefied petroleum gas to the Gas Filling Plant and fuel oils to the country’s power generating and water desalination plants.

Petrochemicals

Petrochemical Industries Company (PIC) established in 1963, manages petrochemical plants for the produc-

KPC WORLD,JANUARY,MARCH 2005 17 tion of liquid ammonia, urea fertilizer, and polypropylene and is a joint owner of EQUATE Petrochemical Company/ PIC manages the three liquid ammonia plants and three urea plants and a polypropylene plant. PIC established EQUATE as a joint venture with Union Carbide maintains the fuel storage tank depot. Jet A- focus on delivering Q8’s quality products and Corporation, a subsidiary of the Dow 1 is kerosene refined to a greater degree to market leading services to customer groups Chemical Company, each holding a 45% suit aircraft systems and engines. with specific needs: share, and Boubyan Petrochemical Company, KAFCO’s Jet A-1 is produced by the refineries Q8’s International Diesel Service concept - a which holds a 10% share. The joint venture at KNPC. The fuel is pumped through under- secure fuel card service supported by fully commissioned the state of the art petrochem- ground pipelines linked from the refineries to automated technology for national and inter- ical complex. The complex includes an ethyl- the Company’s storage tanks. KAFCO’s job is national road transportation companies - is ene producing unit, two polyethylene produc- to ensure that the aviation fuel meets the available at more than 700 strategically locat- ing units, and one unit for the production of standard specification. ed sites throughout Europe. ethylene glycol. The Company’s depot, located at Kuwait Q8 Aviation, the international jet fuel market- PIC is also a joint owner of EQUATE Marketing International Airport, is equipped with fuel ing arm of KPI, supplies over 200 airlines at Company, in Bahrain with a 49% share. Other storage tanks, hydrant and high flow refu- more than 40 airports worldwide. company investments include: 33.3% share ellers. Q8Oils is a significant name in all sectors of in Gulf Petrochemical Industries Company in the lubricants market, with five lubricants Bahrain, 30% share in Sino-Arab Chemical Foreign Exploration, Development, blending plants, direct sales and marketing Fertilizer Company in China and 10% share in Production activities across Europe and export sales to Boubyan Petrochemical Company in Kuwait. over 75 countries worldwide. Kuwait Foreign Petroleum Exploration Kuwait Petroleum International’s values of Marine Transportation Company (KUFPEC) was established providing high quality products, innova- in 1983. It is involved in the explo- tive and friendly service and industry Kuwait Oil Tanker Company ration, development and produc- leading operating standards mean that (KOTC) was established in tion of crude oil and natural gas Q8 is the clear partner of choice for 1957. It owns and operates one outside Kuwait. KUFPEC conducts consumers and businesses worldwide of the largest fleets in the world. on going onshore and offshore explo- KOTC’s fleet comprises of petroleum product ration and production programmes in three Upstream, Downstream Production tankers, crude oil tankers, liquefied gas major regions: the Middle East and Africa, Far in the Divided Zone tankers, bunker barges and tugboats. East and Southeast Asia. The Company has The Company transports a percentage of interests in Yemen, Egypt, Sudan, Tunisia, Kuwait Gulf Oil Company (KGOC), established KPC’s ready for delivery crude and petroleum Algeria, Pakistan, China, Australia, Indonesia, in 2002, controls and manages Kuwait’s products, providing a marketing advantage and Malaysia. KUFPEC also has gas sale share of natural resources in the Divided for the Corporation. KOTC also charters out its agreements in Australia, China, Indonesia, Zone, which is shared by Kuwait tankers to the international market and man- and Pakistan. and the Kingdom of Saudi Arabia. ages the Marine Agency Branch that provides The Company assumed respon- services for foreign oil tankers calling at International Downstream Production, sibility in 2003. Kuwait’s ports. Marketing KGOC is responsible for oil The Company also manages the Gas filling Kuwait Petroleum International, and gas exploration and Plant for the production of domestic Liquefied under its distinctive “Q8 sails” logo, production, refining, market- Petroleum Gas (LPG) cylinders. The LPG is refines and markets fuel, lubricants ing transport and storage. provided by Mina Al Ahmadi Refinery. and other petroleum derivatives to Al Khafji and Al Hout offshore oil a diverse customer base across fields are the main production sources Jet Fuelling Service Europe and in Thailand. With more in the Divided Zone. than 4,000 retail service stations, as well The development of the offshore Al Dorra gas Kuwait Aviation Fuelling Company as direct sales operations delivering field development is considered as one of the (KAFCO), established in 1963, is a fuel and heating oil to domestic and future promising projects of KGOC. supplier of Jet A-1, a fuel known industrial users, Q8 is a well known, as Aviation Turbine Kerosene (ATK) respected and trusted supplier and at Kuwait International Airport and business partner. In addition, specialist business divisions

18 KPC WORLD,JANUARY,MARCH 2005 Kuwait’s modern history is inextricably bound up with the discovery and exploitation of its oil wealth. The devel- opment of the oil industry over the last decades provides the very foundation of economic progress in Kuwait and the welfare of all its citizens This special file sheds light on the his- tory of the oil industry in Kuwait, the story of KPC from its inception, the try- ing phase during the Iraqi occupation, and the challenge of rebuilding the oil sector after liberation.

KPC WORLD,JANUARY,MARCH 2005 19 In 1921, Sheikh Ahmad Al-Jaber Al-Sabah modity which could stimulate and revitalize became the Amir of Kuwait. A brave and their trade. resourceful leader, a man of vision as well as a valiant warrior, Sheikh Ahmad was to steer Oil Concession Agreement Signed his people through difficult times as the 1920s drew to a close. The cultured pearl On December 23rd, 1934, Sheikh Ahmad Al- industry became a serious, and ultimately Jaber Al-Sabah signed a document which overwhelming, competitor to Kuwait’s main was to increase his country’s wealth and industry, pearl diving. In spite of this, and international importance: the first Kuwait oil despite a worldwide decline in trade as the concession agreement granted to Kuwait Oil thirties began, he kept his faith in the future. Company Limited. Kuwait Oil Company, Ltd. This was largely because of several strange was formed by the Gulf Oil Corporation black patches of a rough bituminous sub- (presently Chevron Oil) and the Anglo-Persian stance which had long been observed in dif- Oil Company (presently British Petroleum). History ferent parts of the desert. The Ruler and his people were well aware of the activities of the Oil Discovered oil prospectors in neighbouring Bahrain, Saudi Arabia and Iraq - to say nothing of the While drilling continued in Bahrain, attention of Kuwait’s Anglo-Persian Oil Company’s successes in turned to Burgan and to the recommenda- southern Iran. Their expectations raised by tions about this area in the technical report of the Bahrain oil discoveries of 1932, Kuwaitis Cox and Rhoades. Geological surveys were Oil Industry were hopeful that these surface deposits carried out and the Company drilled in this betokened underground reservoirs of a com- area through 1937 and early 1938. It was

20 KPC WORLD,JANUARY,MARCH 2005 here, on February 22nd, 1938 that oil was discovered. Moreover, this oil was under such pressure and in such quantity that it blasted through the well head valve with such force ment. The celebration, held under the aus- that it could not be controlled. It was a gush- pices of the late Sheikh Ahmad Al-Jaber A- er that was “difficult to hold”. Lack of suffi- Sabah (then the Amir of Kuwait), was attend- cient drilling mud to block the hole meant that ed by the country’s senior officials, the other means had to be found to block the Political Resident in the Gulf area, the Political Nationalization of the Oil Industry well, and found immediately. Donald Agent in Kuwait and a distinguished audience Campbell, then Chief Accountant, finally of guests. A new era of historic importance began on located a 60 foot wooden pole in the town December 6th, 1975 with the nationalization bazaar which served as a temporary stopper. Mr. Southwell, Director of Kuwait Oil of Kuwait’s oil industry. In line with all the And that was how they brought in Burgan No. Company Ltd., London, started the event by other Arab oil producing states, Kuwait began 1 - at 11 a.m. on a rainy Thursday morning. receiving Sheikh Ahmad Al-Jaber A-Sabah negotiations in the early 1970s to restore This first well is still producing today. and his companions and escorting them to control over its own natural oil resources. By the ceremony site, where the silver wheel had mutual agreements with the Company’s two The 30th of June, 1996 marks the 50th been placed to herald the occasion. Sheikh original partners, the State’s shareholding in anniversary of exporting the first Kuwaiti oil Ahmad turned the wheel to start the first Kuwait Oil Company was increased progres- shipment. This enabled the State of Kuwait to Kuwaiti crude oil shipment flowing smoothly sively until full control was achieved. On join the ranks of the world’s major oil produc- through an off-shore pipeline to the British March 5th, 1975, an agreement was signed ers. At 7 o’clock in the morning of the 30th of tanker Fusilier. 10,567 tons of crude oil were by the State of Kuwait and the two oil compa- June, 1946 a grand celebration was occa- loaded in 11 hours and 13 minutes, an aver- nies (British Petroleum and Gulf) giving sioned by exporting the first Kuwaiti oil ship- age of 950 tons per hour. Kuwait complete control of its oil resources.

The Silver Wheel : The First Oil Shipment Signing the concession agreement on 23rd On June 30th, 1946 H.H. the late Sheikh Ahmad Al-Jaber Al-Sabah December 1934. turned a silver wheel to start Kuwait the tanker ’s first crude oil export aboard “British Fusilier”.

KPC WORLD,JANUARY,MARCH 2005 21 KPC’s origins are rooted in epic drama worthy of any Hollywood classic. It is a child of the turbulent 1970s , when con- flict scarred the Middle East and world oil markets followed a roller coaster ride. These were the twilight years of colo- nialism and the coming of age of nationalism when the people of the developing world were demanding their own sov- ereignty, especially over their national assets.

22 KPC WORLD,JANUARY,MARCH 2005 To understand the context of KPC’s birth one to 51% in 1983 but that was not satisfactory January 29th 1974 and ratified by Law 9 of must understand the forces of those times. to Kuwait’s parliament who rejected it. The that year. The question has often been raised Kuwait had been fully independent since popular demand for sovereignty over the as to why Kuwait did not then take over all of 1961 and a UN member since 1963. Kuwait country’s resources was too great for that. KOC. The concept of ‘participation’ being par- enjoyed a fully functioning democratic The parliament was concerned that the oil tial ownership achieved by negotiation rather Parliament with ambitions of ensuring that was being extracted too quickly and being than complete nationalization was devised Kuwait had full control over its own destiny converted into devaluing dollar so it instruct- consciously because outright nationalization and that her reserves were conserved for ed KOC to limit production. At the time, BP would disrupt relations with the oil companies future generations. Several other Arab coun- and Gulf, concerned to get as much as out of who controlled access to the markets, and tries had completely nationalized their oil Kuwait before KOC was nationalized, were would put the exporting countries in the busi- industries. Iran had done so as early as 1951. pumping annual average of about 3.3 million ness of selling oil, with which they had little The 1973 Arab Israel war had just been bpd even reaching 3.7 million bpd. This only experience. Besides being a matter of sover- fought and OPEC had become a force to be increased pressure for nationalization. The eignty, oil is also very much a business. reckoned with. Great Britain had withdrawn first concrete move towards this came in Kuwait would have to compete with other from the Gulf, yet Kuwait’s greatest physical early 1974, when the Kuwaiti State acquired exporters for markets. Fears were that this hydrocarbon resources were still the property 60% of KOC. At the time, Kuwait’s return on would lead to a dramatic collapse in the price of the original foreign KOC concessionaires, the oil industry, apart from jobs for its citizens structure as each producing country tried to the UK’s BP and America’s Gulf Oil and had and agency opportunities was through royal- meet its national budget in the face of declin- been since 1934. The situation couldn’t con- ties on the volume of oil pumped and a share ing prices by moving larger volumes of oil to tinue; it was a question of national sovereign- of the profits through taxation from KOC and the market. Although several other major ty. Aminoil, the American consortium which had OPEC producers had gone the path of outright held the Neutral Zone concession since 1948 nationalization, it was not something which In fact an agreement had been reached and had built the Mina Abdullah Refinery in Kuwait was ready for at the time. The original between the KOC partners and Kuwait’s for- 1958. 1974 Participation Agreement mer minister of finance and oil Mr. called for a review if the rela- Abdulrahman Al Ateeqi, in October 1972 for The acquisition was under what was known tionship between the the government to acquire 25% of KOC rising as the ‘Participation Agreement’, dated Government and BP and Gulf

KPC WORLD,JANUARY,MARCH 2005 23 prior to the end of most important part of the industry, the oil Performance through Integration 1979. However, events fields, in its hands, it had to figure out how to With all the major pieces of the industry now moved quickly. In make the best use of that resource. in its hands, the Government put the final august 1974 the gov- touches on how to make them work together ernment formed the Perhaps the most important factor then was in the most effective manner possible. The Supreme Petroleum the establishment of the Supreme Petroleum answer was KPC. It was formed in January Council, Kuwait’s para- Council which brought together some of the 1980. The shares of KOC, KNPC, PIC and mount oil body to consider how best to build best minds in the country to consider how to KOTC were transferred to the new the new indigenous oil industry. At the time, plan for the future, but without the problems Corporation. KPC successfully welded all the the Ministry of Finance and Oil were one of bureaucracy. They were able to get to the oil companies into one integrated oil industry organization, but on February 9th 1975 they point quickly and to make recommendations and the new structure allowed central plan- were split into separate Ministries with Mr. to the Government. The role of the Ministry of ning of the industry with more effective and Abdulrahamn Al Ateeqi assuming the Finance Oil also changed temporarily. Prior to nation- efficient distribution of the work, closer coor- portfolio and Mr. Abdul Mutallab Al Kazemi alization its main function had been oversee- dination between various elements and the being appointed the Minister of Oil. The fol- ing the operations of the foreign oil compa- better use of engineering economies of scale lowing month, Kuwait announced that it nies which produced Kuwait’s oil and manag- which are so important in a thriving oil indus- would take over all of the oil industry and ing relationships with other oil producing and try. Each company was to focus on their own entered into discussions with the KOC part- consuming countries. 1975 saw the takeover activity which provided the commercial flexi- ners, BP and Gulf. By December 1975, an of KNPC, and March 16th 1976 saw the bility necessary to run a successful oil busi- agreement had been reached whereby the takeover of PIC. Aminoil with its Neutral Zone ness. KPC took over the function of marketing government acquired the remaining 40% of operations and Mina Abdullah Refinery was Kuwait’s oil outside Kuwait from the Ministry KOC. The final agreement was signed for nationalized on September 19th 1977. The of Oil. Kuwait by Minister of Oil Abdul Muttaleb Al Kuwait Wafra Oil Company was formed to Kazemi, for BP by Mr. P.I Walters who later take over its operations. KPC began expanding its operations world- became BP’s Chairman and for Gulf by Mr. wide. KUFPEC was established in 1981 with M.L Ralston. Parliament approved the deal The development of Kuwait’s oil industry was the responsibility of exploration and produc- with Law 10 of 1976. given a great boost in early 1978, when tion outside Kuwait and in 1983 Kuwait Sheikh Jaber Al Ahmad Al Sabah became the Petroleum International was set up in London But Kuwait was still a long way from having a Amir. Sheikh Ali Al Khalifa Al Sabah was and proceeded to build a European wholesale fully integrated oil industry. It was not in the appointed Minister of Oil and immediately and retail network by acquisition and devel- same position as the oil majors, who had went to work on how to consolidate Kuwait’s opment. established markets for the oil from oil fields oil industry into a world class player. The who could refine it and transport it to mar- Government acquired KOTC on June 17th KPC’s growth over the years in now a legend. kets. 1979. Kuwait is now truly the mistress of her own oil industry and KPC is now an oil major by all Now that the Government had at least the standards.

Then in 1993, KPC reviewed its future strategy and decided to divest itself of The links between Santa Fe and Kuwait Fe gained the benefits of being part of a major non-core business. In early 1996, KPC’s stretch back to 1951 when Santa Fe OPEC producing company and KPC would Board discussed selling some of its hold- began drilling in the Neutral Zone gain access to an internationally renowned ings in SFIC and in the summer of 1996, between Kuwait and the Kingdom of drilling company with exploration and produc- the Supreme Petroleum Council approved Saudi Arabia. This relationship grew tion assets. This was the culmination of a this decision. from strength to strength and lead to three decade long relationship during which a In 1995 Santa Fe put in place plans to KPC acquiring Santa Fe some thirty strong mutual respect had developed. Santa return to its original core business of con- years later. Fe would retain its name and would keep its tract drilling. It sold its North American oil In December 1981 Santa Fe was management team. It would be business as and gas assets. The company concen- bought by KPC. Both parties stood to usual with an enhanced capability for both trates on providing drilling services both gain greatly by this acquisition. Santa parties. on client owned rigs and those it owns.

24 KPC WORLD,JANUARY,MARCH 2005 vailing among all employees and senior manage- ment at the time. We all worked as a cohesive team and achieved excellent results. The employ- ees’ efforts and diligence enabled the Corporation Abdulrazak Mulla Hussain to make it through the early years and become a great economic bastion. The various projects and investments it took on at the local and internation- “Dedication, Teamwork Enabled al levels were crowned with excellent results.

KPC to Overcome Challenges” How do you regard the Corporation’s future in the light of the increasing world demand for oil? Deputy Chairman & Managing Director This is another challenge that KPC has to face up for Planning, Finance & Administration to and it needs careful planning. KPC’s strategic st st plan relies heavily on the oil production level 21 Jan. 1980 - 31 Oct. 1993 increases to enable Kuwait to provide its share in meeting world demand. A considerable part of this The beginnings are always fraught with chal- burden falls on the exploration and production arm lenges, especially if expectations are high and of the Corporation. which should do its utmost to the project is heavyweight such as establishing achieve a huge conglomerate like the Corporation. the potential economic production level with full Former Deputy Chairman & Managing Director consideration for the conservation of the oil for Planning, Finance & Administration, Mr. resources and protection against its damage. Abdulrazzak Mulla Hussein recalls the early days of the Corporation, and the challenges the This will not be realized without the serious devel- oil sector faced establishing a new company in opment of experienced human resources so that a period of global recession in the oil markets. the increases in oil production become additional resource of other major industries for the What were the challenges you faced when KPC Corporation and other sectors in Kuwait, locally was first established? and internationally.

No establishment process happens without hard- What are your wishes for the future of the ships, and the law establishing KPC was no excep- Kuwait oil industry? tion. It was carefully drawn with a comprehensive future vision that took into account the individuali- Of course I wish it the best. I believe that the sen- ty and independency of subsidiary companies, ior management and all levels of employees work- each of which had a long history of success and ing under consistent policies will build on what has achievement. There were concerns that coordina- KPC faced its biggest challenge, however, during been done before to maintain the Corporation as a tion among their respective operations would not the Iraqi invasion of Kuwait and after liberation in leader and a role model. be that easy. 1991 when the oil sector was charged with the huge task of extinguishing the oil-well fires and I also hope that more efforts will be expended on At the time, there was another challenge of form- rehabilitating the oil facilities and installation to human resources training and development to pre- ing various management, financial technical, mar- enable Kuwait to resume exports and provide oil pare them for the appropriate future running of keting and audit groups to mention some of KPC’s products for local needs. such huge activities in KPC and its subsidiaries tasks list. These paved the way for success with paying particular attention to safety and security centralized planning of the oil sector supported by How do you regard the Corporation’s role in measures and safeguarding our environment. the competent subsidiaries. boosting the national economy? Is there anything you would like to say to the The challenges were compounded by the fact that KPC is an economic giant with great influence on oil sector employees? the Corporation was founded at a time of econom- the national economy. It is the main source of the ic slow-down in the industrialized countries caus- State’s revenues and the huge projects undertak- In this first month of the New Year, KPC will cele- ing depressed demand for crude oil. OPEC en by KPC and its subsidiaries have a far-reaching brate its Silver Jubilee. It still has among its thou- Members’ production suffered. The Gulf countries effect on the economy. Also, opportunities offered sands of employees many who have been with it were the most affected as their revenues dwin- in the past and present to the private sector such since its early days. dled. The Corporation had to take fast strategic as petrochemicals, fuels for the local market, lube I think that these colleagues share my opinion that decisions to improve Kuwait revenues with major oil production, petroleum-coke calcining do have the oil sector has made giant strides during the expansions. Expanding and upgrading Mina Al- influence in driving the national economy. period and is a source of pride for all. Ahmadi and Mina Abdullah refineries, acquiring I am confident that they and all their colleagues some refining and distribution facilities in Europe, What are your impressions and evaluation of will continue their efforts and con- and investing in oil exploration and production in your tenure? tribution to the development, pros- several other countries were examples of what perity and progress of the oil sec- was done. I cannot at this point but laud the high spirit pre- tor.

KPC WORLD,JANUARY,MARCH 2005 25 26 KPC WORLD,JANUARY,MARCH 2005 The Iraqi invasion was by far the most severe Mr. Abdul Razzak Mulla Hussein, KPC’s trial Kuwait and the Kuwaiti oil sector had to former Chief Executive Officer, and Mr. endure. However, even the darkest phases Hani Hussein the current Chief have a silver lining and those trying times Executive Officer. The office received revealed the strong Kuwaiti determination and many calls from several officials and the ability of the Corporation to manage its employees. Then a social plan was operations from a distance. Although fourteen drawn to ensure housing and cover years have passed since that catastrophic the expenses of the Kuwaiti employ- event, the memory of the joint efforts in the ees and the working staff there. Corporation, as well as the strong close-knit Additionally, a schedule was set harmony among employees remain fresh in up for the allocation of our minds. Throughout a deep sense of patri- new responsibilities, otism permeated which was reflected in the and the Corporation collective and one-team work. adopted a systematic approach and a plan to To manage the invasion crisis KPC took three manage operations and major steps: the first was to gather the leaders define priorities. of the Corporation; the second was to set up a plan for the management of the operations The most pressing priori- from the temporary headquarters in London; ties were to restore the and the third was to draw a plan of the Kuwaiti tanker fleet, to pro- “Return” program. Furthermore, the tect the record of tankers, Corporation and the Ministry of Oil worked on maintain a record of the cap- different fronts to regain control of the situa- Corporation’s employees ture leaving no traces tion and successfully manage the operations stranded abroad in case of behind. Then information leaked that someone until the liberation of Kuwait. emergencies, and keep track was trying to sell one million barrels of Kuwaiti of the Corporation’s deposits outside Kuwait. crude, and it became apparent to KPC officials Management of Operations from London During the initial stages of the occupation, the that this was the stolen quantity. They imme- Corporation faced some difficulties to monitor diately started to take the necessary judicial Immediately after the news of invasion broke the fleet of tankers belonging to the Kuwait Oil procedures to restore the cargo. As a result of out, the management of KPC operations shift- Tanker Company and the tankers chartered this incident, the Board of Directors of the ed to the headquarters of Kuwait Petroleum from world markets. In order to fulfil the terms Corporation set up a table of authorities and International Company in London; at the out- of the Corporation’s agreements, a team was granted the official authorization to all its set, the operation management was headed created to monitor the marine operations all employees abroad in order to collect the by the Managing Director International over the world. After the tankers had delivered amounts of money due by the customers to Marketing, Sheikh Ali Jaber Al Ali who was in their cargo, it became necessary to charter the the Corporation, and cancelled the authoriza- London at that time. Sheikh Ali instructed Mr. Corporation’s fleet out to the world oil mar- tions given to the employees who stayed in Nader Sultan, former KPC Deputy Chairman & kets. And in order to observe the terms of all Kuwait. Chief Executive Officer who presided over KPI charter parties, the Corporation purchased at the time, to contact the Board Members of quantities of Saudi crude to fulfil all its con- The headquarters of Kuwait Foreign Petroleum the Corporation and its top officials he could tractual obligations made prior the invasion. Exploration Company was shifted to London manage to find. Mr. Sultan was able to contact and later to Dubai. The top priority was also given to the follow-up of the employees’ That period was not free of imped- affairs in Kuwait, the need to provide for iments as an unfortunate them and their families, the distribution of incident occurred during the salaries to cover their living expenses. tracking of Kuwaiti oil Afterwards, the problem of business emerged tankers. A tanker escaped since KPC has sold oil quantities to its clients carrying one million barrels of around the world and it needed to settle all the Kuwaiti crude oil, and did not invoices and collect the amounts due. Owing pay heed to demands to return to the embargo imposed by the United Nations its cargo. During the process of on Iraq, all the Kuwaiti balances tracking the tankers it was were blocked to protect them located at the port of Abu Dhabi from being seized by the Iraqis, however it managed to escape and the release of the Kuwaiti

KPC WORLD,JANUARY,MARCH 2005 27 with the under-secretary of the Ministry of Petroleum at that time, Mr. Sulaiman Al Omani, and the operations management office in London. His Highness the Amir of Kuwait Razouqi also contacted the officers of the Sheikh Jaber Al Arabian Oil Company and emphasized that Ahmad Al Jaber Al they should refuse any calls or instructions Sabah, with for- mer Minister of Oil from the Iraqi regime. Furthermore, Razouqi Dr. Homoud Al discussed with the company the possibility of Rqbah, and Saud using Kuwait’s shere in the offshore area to Al Nashmi head of meet the needs of Kuwaiti refineries abroad. the firefighting team, symbolically However, this share was not used because the capping the last oil Kingdom of Saudi Arabia supplied the well fire on 6th Corporation with the crude it needed. November 1991. The Return to Homeland

After having joined all efforts and successfully controlled its affairs and managed its opera- funds took a considerable time. However, tions, the Corporation’s management started within a few short weeks, the team of the KUF- to draw a plan for the return to the country. PEC office, composed of ten persons, was able Besides, the Board of Directors held negotia- November 6th 1991 will go down in to set up a contingency plan that enabled the tions with the world’s five major companies history as the day Kuwait celebrated Company to protect its rights and honour its specialized in oil well fire fighting, as a pre- putting out the last burning oil well fire, obligations. caution to curb any attempt by the Iraqi thus ending the biggest environmental regime to set the oil wells on fire, especially tragedy then known to humankind. Suppressing Iraqi Attempts in OPEC because the Iraqi tyrant had committed a sim- ilar brutality during the war between Iran and International experts had predicted that At the same time, the Ministry of Oil, repre- Iraq. the process of extinguishing the fires sented by Ms. Seham Razouqi, Kuwait’s would take at least three years. In the Former Governor at OPEC and who used to be A tentative return plan was drawn and it took face of this somewhat pessimistic the Assistant Undersecretary for Economic into consideration all the possibilities and best forecast, the Ministry of Oil (now the Affairs at the Ministry - played a crucial role in solutions for the worst scenarios. , Once the Ministry of Energy) expended extraor- curbing Iraq attempts to cancel the member- war of liberation of Kuwait broke out, the dinary efforts and managed to put an ship of Kuwait in the Organization. She also Corporation started to draw its final plans for end to this tragedy in a record time of contributed to the reinforcement of Kuwait’s the reconstruction of the oil sector and the only seven months. presence and participation in the various return home. Actual work began on 3rd of March affairs of the Organization, in coordination 1991. Due to Kuwait’s determination to erase all traces of Iraqi aggression and start the reconstruction of the oil sec- tor, the last fire was extinguished on 6th November 1991. This great achievement, defying all initial forecasts and studies on the environmental impact of the fires and the difficulties of extinguishing them involved not only 18 firefighting teams from all over the world using the latest technology and equipment but the active participation of the KOC Kuwaiti firefighting team.

28 KPC WORLD,JANUARY,MARCH 2005 Production: Gas Refining and Liquefaction: management capability. • Carried out the operations of extracting, • Extinguished oil well fires and con- • The repairing and restarting of refineries disinfecting and rehabilitating the oil tained leaking wells occurred in accordance with a progressive lakes. • Repaired the well heads and the time schedule. • Restarted and leased the oil tankers, damaged wells added a new giant tanker, and supplied • Drilled 98 new wells to compen- • The refineries at Mina Al-Ahmadi, Mina the European market from offshore oil sate for the lack of production. Abdullah and Shuaiba restored the capacities reserves during occupation. they had before the occupation. • Finished the studies regarding the Petrochemicals: reservoirs, to extract 14.2 million • The main and subsidiary plants, as well as barrels of oil from lakes until 1994. the plans for the manufacture of Iosythene • Restarted the ammonia pipelines and and bitumen, for cracking , for aviation fuel finalized the preventive maintenance • Repaired and restarted the gas net- and others, were all repaired and restarted. works. works, and rehabilitated the crude oil • Maintained the equipment of the Export transport and storage facilities, as • The plants for the gas liquefaction, the arti- Department and inspected the precision well as the pipelines and export ficial island at Mina Abdullah, local electrical instruments, pressure engines and sub- piers. supply stations, pipelines for carrying the oil stations. and gas to the refining plants, tankers, • Restarted the Salt and Chlorine Plant in Exploration: pumps and plants for the storage of crude oil order to cater for local needs. and its by-products were all repaired. • Reassessed and carried out the eco- • Set up an exploration plan for the nomic feasibility study of the coming five years. Marketing: Polybromine project. • Launched the petrochemical com- • Managed the marketing process from pound project with a foreign partner. abroad during occupation, and restored this

KPC WORLD,JANUARY,MARCH 2005 29 After the successful culmination of the reconstruction process and recovery of KPC’s optimum capacity, KPC launched extensive expansion projects in all areas of its operations and began reassessing the value of keeping old assets; the aim being to consolidate and strengthen its posi- tion as a regional leader. This file highlights key future proj- ects, challenges, and strategic directions towards more growth and success.

30 KPC WORLD,JANUARY,MARCH 2005 From East to West, KPC’s International Expansion

Kuwait Petroleum Corporation’s marketing strategy is to seek to expand its world activities and two million tons per day i.e. 70% of the overall open new horizons for promising projects in all the different fields of the oil industry: oil and gas market share. exploration, production and world marketing. As a result of this strategy, KPC’s business, as car- ried out by its subsidiary companies, covers the four corners of the world. The Corporation is now Another major marketing achievement is that of well established in the major world markets and is endeavouring to grasp the promising opportu- gaining access to the Spanish markets by the con- nities to reinforce its financial yields and expand the scope of its operations. Despite increasing clusion of contracts with Sispa and Ripsol compa- competition in the world oil market and the challenges which have emerged with the New World nies. This success represents the beginning of the Order, the International Marketing Sector is still implementing its strategic plans aimed at rein- implementation of the corporation’s strategy forcing its position in the main markets and diversifying the outlets of crude oil and oil products aimed at expanding activities in Europe. exportation. The Eastern markets are the main outlets for Kuwaiti crude oil and oil products, but the Corporation is looking forward to reinforcing its position in other markets which offer promis- According to the future plans, the Corporation will ing opportunities. become the main supplier of Kuwait Petroleum International in the airports of Europe, Thailand and Hong Kong. Kuwaiti oil exports include crude oil and oil prod- the Iraqi invasion of Kuwait caused the destruction ucts, liquefied petroleum gas, chemical fertilizers, of much of the oil infrastructure including the Reopening the African Markets salt and chlorine. These exports have witnessed export facilities and some 40% of the storage considerable changes over the years. In the 1970’s tanks. Ten years ago, Africa was a major market for crude oil accounted for 84% of exports. At a later KPC’s Activities in Asia and Europe Kuwaiti intermediate oil by-products, but the hard stage, Kuwait adopted a strategy to gain higher conditions suffered by the Kuwaiti refineries as a yields by increase the exports of oil products, The decision to abolish dealing through intermedi- result of the brutal Iraqi invasion had a bad effect petroleum gas and petrochemicals, by moderniz- aries reinforced the determination of the on the quality of these by-products and conse- ing and expanding the refineries. KPC, through its International Marketing Sector to focus on expand- quently on the relation with some markets in this subsidiary Kuwait Petroleum International, also ing its activities in the main markets where KPC field. acquired a number of fuel oil stations in several has interests, to gain access to new markets which countries to directly expand the marketing scope offer promising opportunities and to search for The International Marketing Sector has recently of Kuwaiti oil products. new non-traditional opportunities in established regained these markets and opened other markets markets. Indeed, KPC reinforced its presence in in the continent by concluding spot selling trans- As the years passed, Kuwait came to occupy an the markets of Singapore, Hong Kong, Bangladesh, actions in several African countries. KPC now eminent position in oil markets in many countries Indonesia, Pakistan and India. Most notably, the seeks to hold negotiations to con- and different geographical areas, since it regularly Corporation succeeded in increasing exports to clude long-term contracts for a met the requirements of such markets and gained Bangladesh, and has now become the major sup- period ranging from one to three a good reputation as a reliable supplier, However, plier to that country; indeed, its exports amount to years.

KPC WORLD,JANUARY,MARCH 2005 31 The Corporation Eyes the Chinese Giant grated exploration, development and production project. China is a very promising market with the prospect of greatly increasing future demand in which KPC KUFPEC hopes to rise up to the standard of world is endeavouring to reinforce its position. The companies, and is now exploring for oil in larger Chinese market has potential not only for the sup- fields, as the Company has a long-term plan of ply of crude oil but for Kuwaiti investments in such increasing production to 100,000 bpd by the year fields as refineries and oil by-products industries. 2010 compared to the current production of around 43,000 bpd. The company is also seeking The International Marketing Sector has been seek- to increase its strategic reserves from the current ing access to the Chinese markets for a long time 230 million barrels to 410 million barrels by 2010. and started by cooperating with the world giant corporations which are already settled in the east. In more recent years, the company expanded its The Shell Company was successfully supplied with exploration activities in new regions around the aviation fuel for the Singapore and Hong Kong air- world such as Australia and Indonesia. KUFPEC ports in order to reinforce the Corporation’s pres- took part in three exploration sectors which com- ence in the latter. This agreement represents a plete the Australian business portfolio and repre- additional gas reserves in the “Kadanoury” and great achievement as it provides the Corporation sent an excellent basis for the operations there. In “Zamzama” fields where the k-14 assessment with an access to the huge Chinese market 2003, the development of the Exceter Mountaineer results of the well in the Kadanoury field revealed through its commercial gateway, Hong Kong. field was launched as well as the development of the existence of a gas reservoir 28 meters thick some facilities in the island of Veranus which will and with a production flow of 15.5 million cubic KUFPEC : The Winning Horse be finalized in 2005. These projects will help feet per day. The company estimates that this well increase the gas productivity and reinforce the contains reserves ranging from 50 to 150 billion Kuwait Foreign Petroleum Exploration Company facilities required for the Burrup plant. The Oseel cubic feet of gas, which stands to reinforce the (KUFPEC) has made an impressive turnaround by field in Indonesia has started to operate effective- overall reserves of the Kadanoury field. Production converting losses to gains. Until a few years ago, ly. from this well is expected to start in 2005. KUFPEC was regarded as the losing horse in the Corporation’s race but has now proved itself a In the Arab countries, the company has begun to In the Zamzama field, the assessment drilling of successful investment by any standards and set up plans to enter into the new exploration sec- well ZZE-1 revealed the presence of a gas reser- recently recorded a considerable increase in prof- tor 24, and is now seeking to participate in a new voir in the “door” layer at a depth of 4,150 meters its. KUFPEC continues its achievements by project, in collaboration with a foreign company, of with a thickness of more than 36 meters and con- expanding its investment projects to cover new carrying out oil exploration in Qatar, as well as taining a reservoir with an estimated capacity of areas and several countries which are full of prom- geological and air surveys by which it hopes to dis- around 150-200 billion cubic feet of gas. The com- ising opportunities for exploration. cover commercial quantities. Currently, the com- pany expects that these two wells will help provide pany is studying several strategic projects in many a clearer view of the nature of reservoirs in the KUFPEC was established in 1981 and is the only countries of the world including projects for the Kadanoury and Zamzama fields. The assessment company in the Arabian Gulf region which carries exploration and development of oil fields in the studies now being conducted will contribute to a out integrated operations including exploration, Arab Republic of Syria where many projects have production plan for these two reservoirs. This pro- development and production in many regions of been made available to the private sector by the duction will be added to the existing contracts cov- the world, including: Australia, China, Indonesia, Syrian government. These proposed projects ering gas produced by these fields and sold in the Pakistan, Sudan, Tunisia and Yemen. include, among others, the development of many Pakistani market. It is worth mentioning that KUF- newly discovered gas fields in the country, via sev- PEC has a portfolio of gas producing assets in The Corporation’s strategy consists of expanding eral tenders in which many world oil companies Pakistan, in collaboration with the British Bremer the scope of its oil industry related activities in the have participated. Another big project, the Oil Company. It also has other exploration assets whole world by adopting an investment policy “Tadmur Gas Project” involves the development of and the company hopes that such assets will gen- which is flexible, diversified and supported by a gas fields in the Tadmur region. It is worth men- erate positive yields in the future. world class technical expertise, and by focusing on tioning here that these projects grew in importance investments which represent a strong guarantee of when the government decided to finalise the Arab Finally in Russia, there is a joint committee long-term profitability. gas pipeline project which stretches from Egypt between KUFPEC and the Russian Federation and passes through Jordan, Syria and Lebanon, which considers any exploration opportunities In the 1980s, KUFPEC started to operate on its own and will later be extended to several European which are in line with KUFPEC’s aspirations and account after having acquired operating rights in countries. goals. the Northern and Southern Al Qiaruwan fields in Tunisia and after having explored for oil in Egypt In Pakistan, KUFPEC intends to carry out offshore and gas in China. In 1989, the Company carried exploration which is quite new there since only one KPI: Strong International Presence out the first commercial oil exploration in the Sidi or two companies have preceded the company in Al Kilani field in Tunisia, the Company’s first inte- this field. KUFPEC announced the discovery of The activities of KPI constitute some of the major

32 KPC WORLD,JANUARY,MARCH 2005 strategies for achieving these goals are based on Early in 1984 Gulf’s marketing and distribution the principles of the company which is devotedly interests were acquired in Italy, and in 1986 came committed to serve its business, the environment the move into the UK. KPI has been quick to utilize and the society, and to develop and promote the opportunities for further acquisitions where these capabilities of its employees while observing the show good strategic fit. In 1987 it increased its highest administrative, operating and safety stan- penetration of the Danish market by acquiring BP’s dards. operations, thereby securing a leading market share. 1990 saw the purchase of Mobil’s market- KPI’s marketing strategies are based on renewal, ing network, which made Kuwait Petroleum the innovation and the quality of products. In this con- third largest company in the Italian oil industry. text, the company introduced the first unleaded fuel in Europe and created the first network for Kuwait Petroleum International celebrated its tenth Diesel sales across borders for long distance anniversary in Europe with the acquisition of most trucks. of BP’s Luxembourg assets in 1993. 1999 saw fur- ther consolidation with the acquisition of both BP’s In 1983, KPC took the opportunity to enter the and Aral’s retail operations in Belgium. business of the Corporation in Europe and downstream sector when Gulf Oil opted to dispose Thailand. The company is in charge of selling oil of most of its refining and marketing interests in KPI’s network of more than 4,000 Q8 branded products throughout the world, and of supervising Europe. KPC bought Gulf’s interests in the service stations extends across seven European the various refining programs which have a long- Netherlands, Belgium and Luxembourg, and sub- countries - Italy, Germany, Sweden, Denmark, term guarantee of profitability. The company’s sequently Sweden and Denmark. Holland, Belgium, Luxemburg - and Thailand.

regular basis, to optimise business oppor- tunities, and correlate and evaluate acquired market intelligence. In addition, Network of Regional Offices the office takes an active part in discus- Support Marketing Operations sion for possible joint ventures in India. Singapore Office Tokyo Office KPC Singapore office was established in Tokyo Office was established in 1968. Its 1972. Ever since its inception it has been Houston Office operations covers Japan, Korea and Taiwan representing the petroleum interests of KPC WH was established in 1994 in and was established to cement KPC’s position Kuwait in south East Asia. Singapore’s Houston, Texas, which is known as the in Asian markets. Also to contact oil, petro- office provides important recommenda- world’s Oil Capital, to strengthen and chemical and liquefied petroleum gas (LPG) tions and analyses with regard to main- establish relations with oil sector players firms, shipping companies and trading hous- taining and strengthening Kuwait’s share in North and South America especially the es in order to support KPC head office in mar- in the existing market, as well as penetrat- former where oil consumption is the high- keting hydrocarbons. ing new markets in the region. est in the world. Mumbai Office Pakistan Liaison Office KPC European Regional Office KPC established its office first in the capital Pakistan Liaison Office established in The varied activities of the office, which is New Delhi on 1999.The office was later relo- 1984 handles mainly technical work such based in London, extend over Europe, cated to the commercial city of Mumbai. The as co-coordinating the schedules of ves- North Africa, Hong Kong and Thailand. office was established as a result of growing sels, handling cargo, allocation, distribu- The office’s mission statement declares business ties between Kuwait and the Indian tion and payment procedures. The Liaison that the main aim is to provide maximum subcontinent. The office carries out many Office is charged with maintaining busi- contribution to the effective sales and tasks, which include giving support to KPC ness relation with the senior marketing operations of KPC and its sub- headquarters in various activities such as officials concerned in the local sidiaries in line with its short-term and market research and gathering market infor- marketing companies, refiner- long-term strategy. mation. It also provides client profiles on a ies and port authorities.

KPC WORLD,JANUARY,MARCH 2005 33 in the Durward and Dauntless fields, a very success successful result in licensing appli- cations, and UK Government approval for the Britannia development. Mr. Faisal Al Kazmawi former KPNSH Chairman said that at the time of disposal Disposing of Assets, “we were producing around 63,000 bpd, with proven and probable reserves of over 180 million barrels. The operations were getting Focusing on ever more efficient, we had excellent relation- ships with the operators and great exploration Core Business prospects. Overall costs had been reduced to $3.11 per beo, which is excellent by North Sea standards. Thistle costs had been cut by more than half in the past five years. We were using all the modern techniques such as extended reach horizontal drilling, satellite field development floating point storage and off take (FPSO) systems, water and gas injec- tion, and the very best reservoir management techniques. Actually the sale of our North Sea assets was like a cherished son leaving home we brought him up and saw him turn into a man but now it was time for him to go.”

North Sea Assets Planning and former KOC Chairman, told KPC World issue 2, that “the disposal was imple- The oil world was abuzz at the end of June mented as part of KPC’s overall strategy. In 1996 when KPC first announced that it was 1993, KPC undertook a strategic study to putting its North Sea assets, represented by identify its core and non-core business areas, its subsidiary KP North Sea Holdings, up for to enable it to focus more closely on activities sale. where it has the best comparative advantage, Investors were soon clamouring to KPC’s and potential for synergy. In the upstream London Merchant Bankers, Robert Fleming area this means domestic production in Nader Sultan, KPC’s former Deputy Chairman and Co., for a once in a decade opportunity to Kuwait. The North Sea assets, although they & CEO, with Ms. Seham Razzouqi at the IPO add a share of some of the UK North Seas’s were then self-supporting from a cash point offering of Santa Fe shares at New York. most coveted operations to their portfolios. By of view, were not considered a core business. mid December of the same year, the deal was They did not provide feedstock for our refiner- Santa Fe IPO done. Norway’s SAGA beat our two dozen ies, nor did they contribute to our other down- The IPO offering of Santa Fe shares in 1993 other blue-chip bidders in a $US1.23 billion stream activities. Although good investments was the focus of worldwide interest. In 1993, deal which saw the publicly listed independ- in their own right they no longer met our cri- KPC had undertaken a review of its future ent Scandinavian major assume KPNSH’s teria for a strategic core business. At that strategy and decided to divest itself of non- external development financing, and pay KPC time, the direction was set. The only question core business. In early 1996, KPC’s Board the remainder, or about 60% pf the overall was when we were going to dispose of dicussed selling some of its amount. them.” holdings in SFIC and in the Talking about the sale which was dubbed the After a decision of selling the assets was summer of 1996, the ‘deal of the decade’ Mr. Abdulatif Al Tourah taken, KPNSH continued to go from strength Supreme Petroleum Council former Managing Director for Corporate to strength. It had twin exploration successes approved this decision.

34 KPC WORLD,JANUARY,MARCH 2005 Nader Sultan “During the twenty-five years that I spent at “KPC’s Accomplishments in its Infancy Form Strong the Corporation, it faced many major political, military and technical challenges brought Basis for Brilliant Accomplishment in its Youth” about by events in neighbouring countries, such as the Iran–Iraq war, regional wars, the Deputy Chairman & Chief Executive Officer Iraqi invasion of Kuwait, the decline of oil prices in the middle eighties, the fires in the 1993-2004 Kuwaiti oil installations and finally the unfor- tunate accidents at our refineries.” He adds An interview with Nader Sultan is nothing “KPC owes a lot to those brave officials and less than a close encounter with the story employees who were able to face those chal- of Kuwait Petroleum Corporation, with all lenges and overcome them.” the challenges and accomplishments, as The past quarter of a century has witnessed told by Abu Rashid in his own concise but numerous fluctuations, and sometimes turbu- meaningful way. In the quarter century lent upheavals, in the oil market. Having suc- that Sultan spent in the Corporation, dur- cessfully weathered those upheavals at the ing which he occupied several positions relatively young age of twenty five years, the before being appointed as Deputy Corporation has indeed achieved a great deal, Chairman and Chief Executive Officer, KPC evidence of the strength and wisdom of the played a major role in the national econo- Corporation’s leadership. my, efficiently dealt with price fluctua- During its youth phase, which started in the tions which were quite sharp at times and nineties, KPC encountered several crises and changes in global supply and demand for problems such as the oil well fires in 1990/1991 oil. Indeed, the Corporation faced many at the hands of the Iraqi invasion forces. The challenges and crises and achieved Corporation was able to restore productivity to numerous accomplishments. its current level after the fires were brought under control and the wells re-built. About these aspects of the story, Sultan has Concerning his wishes for the Kuwaiti oil much to reminisce and tell us: project.” industry, Nader Sultan says “I wish that the With oil revenues accounting for more than As for the indirect role, he explains, “despite Kuwaiti oil industry be the best in the region, 80% of the country’s revenues and 40% of the lack of specific technical studies that the highest in terms of security, safety and GNP, KPC plays the major role in the national measure the effect of the oil sector on the environment, an increased productivity for economy. These figures underline the eco- national economy, it is certain that the invest- our employees, ensuring them job satisfac- nomic role of the Corporation and show that ment of the oil sector in capital projects tion and adequately high remuneration and oil plays a bigger role in the Kuwaiti national exceeding KD 0.5 billion, has considerable for customers, developing our services and income than it plays in that of other countries and far-reaching effects that can be seen in reaching the highest technical, scientific and in the region. the creation of job opportunities, service con- management levels of the giant international This role is two-fold: direct and indirect. “The tracts such as maintenance contracts, resi- oil companies.” direct role is reflected in the direct State rev- dential apartments, car contracts and pur- Sultan emphasizes that the reasons behind enues achieved by projects managed by the chase of goods from Kuwait. In other words, KPC’s outstanding success during the past Corporation as the operating arm of the oil its impact is felt in the various economic sec- years were common vision for the future, sector and owner of huge capital projects. tors in the country.” team work and competent leadership. These The profits flowing into the State Treasury This situation presents KPC with a golden reasons, he adds, are the underlying drivers from the Corporation’s activities amount to US opportunity, by investing in increasing its pro- of the Corporation’s success today. It is my $0.5 billion annually, in addition to the job duction capacity, exploration projects, the most sincere wish that the workers in the oil opportunities it provides to Kuwaitis Northern Oil Fields Project, refining, export sector continue to work with the same team employed in the oil sector, as well as the prof- and petrochemical projects and expanding its spirit, common vision and com- its reaped from the privatization of several oil domestic and foreign investments plete cooperation and offer their projects, such as the calciner coke project, Nader Sultan takes us down memory lane and support to our new Chief fuel stations project and the salt and chlorine tells us about major events he witnessed. Executive Officer.”

KPC WORLD,JANUARY,MARCH 2005 35 Petrochemicals Industry: World Class Competitor

The petrochemical industry dates back to the home, but has also set about establishing Kuwait and the region, comprising of ammonia, 1960s and Kuwait has been actively producing external affiliates for the production of a wider urea, ammonium sulphate, and sulphuric acid ammonia and nitrogen fertilizers since then. range of chemical fertiliz- production was completed in 1966 at the The industry continued to evolve and grow con- ers. The location of such Shuaiba industrial area. Later, the company’s stantly adapting to the latest developments in affiliates in various geo- industrial capacity was expanded with the addi- technology and using Kuwait’s natural gas as graphical regions makes it tion of a further three ammonia plants and two its feedstock. easier for PIC to supply its urea plants. markets. The petrochemical industry managed by the PIC was incorporated by an The first chemical fertilizer complex in Kuwait Petrochemical Industries Company (PIC), a KPC Amiri decree on July 23, and the region was set up in Shuaiba Industrial subsidiary, has not only established a firm foot- 1963. By virtue of that Area, some 50 km. south of Kuwait City. It com- ing for itself in ammonia and urea marketing at decree, the first chemical prised 4 plants (for the production of ammonia, fertilizer complex both in urea, ammonium sulfate and sulfate and sulfu- ric acid), the construction of which was com- pleted in 1966.

Since 1966, the complex has expanded as new

36 KPC WORLD,JANUARY,MARCH 2005 plants were completed. In 1970, four more The main contract tender for the Polypropylene plants - two for liquid ammonia and two for Project was issued on 17.7.1994 to pre-quali- urea production - were added. Another new fied contractors, and the contract was signed in ammonia facility was built in 1984, boosting the January 1995. The construction period was ammonia and urea production capacity of PIC fixed at 29 months. so that it became the largest in the Middle East. PIC is also a force in the salt and chlorine area. On June 19, 1993, the company signed a mem- A PIC complex for the production of these prod- orandum of understanding with Union Carbide ucts, also located in the Shuaiba Industrial Corporation for the construction of the Area, is based on the latest technology to meet Petrochemicals Complex at the Shuaiba international quality standards and specifica- Industrial Area. The project, which is one of the tions. largest projects in the world at present, was on stream late 1997. It consists of units to produce In 1973, PIC bought the equity of B.P. and Gulf 650.000 tons of ethylene and its derivative Historical Milestones in KCFC. On 28th January 1975, KCFC was polyethylene and Ethylene Glycole annually. merged with PIC. The ownership of the Salt and On July 11, 1994, the Amiri Decree No. 138/94 Chlorine Plants in Shuwaikh Industrial Area had was issued to amend and increase the capital been transferred during 1974 from the Ministry of the company to KD 315 million, followed by After the brutal Iraqi invasion of Kuwait of Electricity and Water to PIC. another increase on year 2000 which increases which led to the destruction of the oil the capital to 10400 million. industry infrastructure and the torch- A ministerial resolution was issued on Jan 11th, ing of the Kuwaiti oil wells, the 1976 transferring the ownership of all the pri- On July 15, 1995 the company signed the biggest tragedies suffered by the vate sector’s equity in PIC to the state. Later on, memorandum of association of EQUATE Corporation were the dramatic inci- Amiri decree No. 6 for the year 1980 was Petrochemicals Company with Union Carbide. dents at the Ahmadi and Shuaiba refineries and in the Rawdatain field, issued, establishing Kuwait Petroleum Each company holds 45% of the capital and which caused several deaths and Corporation (KPC) and transferring PIC shares Boubyan Petrochemicals Co. holds 10% of the injuries. to it. capital. The incident at Site 15 in the Rawdatain field, in the North of Kuwait EQUATE 1 Boubyan Petrochemical Company (BPC) was established in Feb 1995 with a capital base of near the Iraq border, which occurred in the first quarter of 2002, was In June 1989 PIC took a major step toward KD 30 million (~ US $ 100 million), through a caused by an oil spill and resulted in expanding Kuwait’s petrochemical industry. A public offering, mainly as a vehicle to enable one of the biggest ever explosions in license and basic engi- the private sector to invest in the petrochemi- the Kuwaiti oil fields. Four people were neering agreement was cals sector. This was made possible through its killed and seventeen injured. signed by PIC and Union 10% equity stake in EQUATE. As of the end of Immediately after that incident, the Carbide Corporation to December 2000, BPC’s total assets were in then Minister of Oil Dr. Adel Al Sabeeh build a 100,000 tones excess of KD 43 million. accepted full political responsibility per year polypropylene for the incident and resigned. plant. Polypropylene is a EQUATE 2 KPC’s success stems from its ability to large-volume plastic On the lines of the successful EQUATE petro- learn from mistakes and avoid the used in a wide range of misgivings of the past. The biggest applications, from chemical venture, PIC and the Dow Chemical Company (DOW), announced the formation of lesson KPC learned was the pressing woven sacks for fertiliz- need to reinforce its health, safety and ers and vegetables to two new joint ventures that are designed to fur- ther develop their commercial relationship in environment (HSE) systems, and pro- carpeting, containers, vide sufficient training for all workers. outdoor furniture, toys the petrochemical industry. Subject to regulato- ry review and customary approvals, Dow and To this end, KPC signed an agreement and car components. with Dupont , a pioneer in the HSE The Iraqi invasion put a PIC will form: MEGlobal, a 50/50 global joint venture for the manufacture and marketing of field, to provide advisory services in hold on plans for this order to set up an integrated system plant but the project merchant monoethylene glycol and diethylene glycol (EG) and Equipolymers, a 50/50 global aimed at upgrading the HSE systems was reactivated after at the oil facilities of the subsidiary the liberation of Kuwait. joint venture for the manufacture and market- ing of polyethylene terephthalate resins (PET) companies, and improving In the last quarter of the skills and performance of and the manufacture of purified teraphthalic 1997, this facility went Kuwaiti personnel in general. on-stream. acid (PTA).

KPC WORLD,JANUARY,MARCH 2005 37 Key Challenges Facing Kuwait’s Oil Industry

38 KPC WORLD,JANUARY,MARCH 2005 Challenges Facing Kuwait Project a relationship where they invested their Another challenge was to create a fiscal Ever since KPC announced its intention to money and were allowed to make the com- structure and relationship where KPC aligned open up the upstream and invite international plex technical decisions. the interests of the two sides. It was impor- oil majors to develop its northern fields, it tant that the elements of the fiscal terms did continued to face one challenge after the KPC Management felt that it was wise to not create any incentive for the oil company other. The decision was met with extreme bring in the oil companies to invest and oper- to act against the interest of the state. The fis- trepidation by the majority who feared that ate the fields and through them use the best cal terms were set to ensure incentives for Kuwait would lose control over its natural capabilities of the service companies. service companies to increase production in wealth especially since Kuwait had national- The second challenge was to have clear the most cost efficient way as they are also ized all operations in the 70’s. objectives as to what precisely KPC wanted to rewarded for cost savings. Another key objec- The first challenge KPC faced was to have a achieve and to define the objectives and put tive was to ensure a stable long-term com- consensus on the need to re-invite the inter- them to the oil companies so that KPC could mitment from the oil companies. national oil companies to the upstream. The evaluate any proposal from a common plat- idea to invite oil majors was conceived form. At the same time KPC recognized that the around 1995, when KPC had established a structure also had to meet the objectives of new production target to reach 3 million bpd Common Platform the oil companies. The project had to be of a by 2005, the issue was brought up by To obtain a better analysis, KPC studied the material size, and should allow them to earn upstream specialists that Kuwait would not history of the upstream contracts, from the an acceptable and competitive return, relative be able to achieve this target without active older concession type agreements to the to the risk. assistance from the international oil compa- more recent production sharing ones and The final challenge was the political process. nies. The increase in production required KPC finally the newest service agreements in In choosing the contractual structure KPC to diversify the production beyond the large Venezuela. Since KPC’s problem was to worked to ensure it was in line with the and easy reservoirs like Burgan, and go to increase production from existing producing Kuwaiti constitution, and therefore did not more complex reservoirs with a deep-water fields, and as there was no exploration risk, it require a new law as KPC wanted to have a cut. The reservoirs by their nature would be was felt that the Venezuelan approach, mod- speedy process. higher cost so there was a concern about ified to Kuwait’s specific needs, was the most It is a fact that Kuwait’s constitution does not managing the future increase in production appropriate. However, one important consid- actually forbid a P.S.A or a concession agree- costs. It was felt that the expertise to manage eration was to ensure that the agreement had ment. It specifies that such agreements need the complexities of such reservoirs was not is in line with the constitution. to be enacted by law, should be for a speci- available within the local industry. So there fied time period and must be done through a was a strong conviction that the technical Additionally, a major consideration within the process where there is publicity and compe- assistance of the international oil companies structure of the relationship was the fiscal tition. was needed. terms. KPC had a clear objective to be able to Moreover, Kuwait was amongst the only three compare different proposals or development KPC first wanted to be firm on the legal inter- hydrocarbon rich countries in the world not plans from a common basis. KPC realized that pretation that service contracts were totally in using the capabilities of the international oil asking the oil companies to each give their line with the appropriate clauses in the con- companies. proposals on the fiscal approach, would have stitution, and therefore there was no need for KPC had to address two important questions. made it very difficult to compare those con- a law or Parliament’s approval. First whether the Technical Service tacts on an equal basis especially if their Agreements, which KPC had signed with development plans were different. While cre- Then the second step was to apply to the new three of the oil companies would suffice and ating the fiscal terms, one overriding principle contract the same Parliamentary process as Secondly, whether the required expertise KPC had set was to ensure final transparency. for a concession and enact it into a law. The from the major service companies can be KPC recognized that at the end of the process third was to create a new “umbrella” law, obtained. there would come the bidding stage and there which would allow the Government and the it needed to be able to demonstrate that the oil sector to execute service type agreements However, the nature of the Service choice of the winner was clear and transpar- within certain agreed principles and process- Agreements was that KPC got consulting and ent. This required KPC Management to make es. The last two approaches gave more of a technical advice, while the companies did not common as many parameters as possible and role to the Parliament and was a less con- shoulder the risk and or handle the decision not have too many variables. frontational approach. making. As KPC shifted its focus to the more complex, and more risky reservoirs it became So it was decided that the contract and the However to enact the agreement into law convinced that the nature of the relationship fiscal terms needed to be a common element some serious problems had to be overcome. with the contract companies needed to given to the potential bidders. By deliberately Firstly, the very technical change. It was believed that to get the best choosing this approach of developing unique nature of the detailed contract capabilities of these companies, and to attain contractual and fiscal terms, KPC effectively did not lend itself to a political their best resources, KPC needed to establish chose a longer route. debate and voting. Secondly in

KPC WORLD,JANUARY,MARCH 2005 39 the negotiation phase it Due to the small domestic demand, Kuwait’s Environment Friendly Industry was unlikely that the oil refining industry was built on the basis of companies would put export to the world, taking advantage of Another feature of the international refining their best terms if the Kuwait’s strategic location in the Arabian Gulf industry is the fast changing and more strin- Kuwaiti side did not where it can serve the key regions of Asia, gent product specifications. Despite poor have the authority to Africa, Europe and the Americas. returns, the industry is faced with the persist- accept and commit to them. There were con- ent need to invest to accommodate the ever- cerns that the Parliament may force further Kuwait’s key driver for entering the business changing shape of the demand barrel and, concessions at a later stage. Thirdly any mod- was a means of diversifying from simply more importantly, the continued tightening of ifications needed in the future would require a being a crude seller, and of deriving more product specifications. law. value from the crude. So today KPC has three It was decided to prepare a new umbrella refineries in Kuwait with a total capacity of There is an increasing focus on the allowable law, which was submitted, to Parliament. 912,000 bpd, one in Rotterdam with a capac- level of sulfur in all fuels. In the developed However progress was made difficult by ity of 77,000 bpd and a 50% ownership in a world sulfur contents have to be brought domestic and regional developments, partic- joint venture in Italy, in a refinery of 270,000 down to 15-30 ppm by mid decade for gaso- ularly with the Iraq crisis and the ensuing war bpd, which means that about half of the crude line and diesel and around 10 ppm towards to liberate Iraq. Nonetheless KPC used this production is refined. the end of the decade. A number of regions time to finish the work on the fiscal terms and are even moving to “zero sulfur” fuels with contract. The first challenge facing Kuwait’s refining sulfur contents of less than 10 parts per mil- industry is the recent poor financial results of lion. On the commercial side, the train started to the international refining business. KPC move again with the approval of the final 3 worked with an international consultant who Over time it is expected that the specifica- consortia and the submission of the draft con- pointed out that most analyses demonstrate tions in Asia will reach the same levels as tract and fiscal terms to them. that the majority of refineries, over their life those in OECD countries. As these specifica- Despite the challenges KPC is confident that cycle, do not cover the cost of their capital tions tighten, it is becoming more difficult to an agreement will be reached on the political due to two main reasons. The first is that in meet them with crude oil selection alone and process for the contract approval as the gov- most markets, capacity generally exceeds therefore investment is required. ernment had emphasized that Project Kuwait demand. Secondly, once the capacity is is a priority for this term of Parliament. installed, since the nature of the business is This is particularly the case in Kuwait as the that the fixed costs are high but the variable crude is by nature of a high to medium sul- It was very important for KPC to create a operating costs are low, there is always the phur quality so the investments that KPC process where there was not only trans- temptation to run additional barrels. needs to make are relatively more expensive. parency and publicity but also competition. By Another new feature, more relevant to Asia, is Since the refining industry in Kuwait is an qualifying 17 companies and by directing that the decline in the relative advantage that export oriented refinery complex, it is essen- them to form different consortia, KPC is cre- Asia enjoyed in refining margins and this is a tial that the quality expectations of the inter- ating a competitive environment, an environ- phenomenon of the last 10 years. national markets are met. So a key focus for ment where the leading companies of the us in the next few years is to have a capabil- world, acting through consortia, will have to To survive in such a low margin scenario, it is ity to produce ultra low sulfur transportation submit their best proposals in competition vital that KPC’s refining industry focuses on fuels. with each other. Other countries in the region achieving deep conversion so as to maximize have chosen a different route where they high value product yield and on minimizing Another broad challenge being faced by inter- negotiate directly with individual companies. the operating costs. Despite Kuwait’s large national industry is the changes in vehicle conversion capacities, there is still a signifi- technology. The transportation segment is Challenges Facing Refining Industry cant quantity of crude that is processed in probably the most important market segment The refining and chemicals activities are two hydro skimming mode. Detailed studies for for refineries. One has to bear in mind that very important areas of the oil industry in the modernization of the refineries are close future refineries will need to meet society’s Kuwait. They generate 58% of KPC’s profits, to completion and KPC is in the final stages of transportation needs, regardless of how vehi- 44% of the revenue, employ 59% of the man- deciding the process configuration for achiev- cles are powered. So we KPC has to prepare power and utilize 55% of the capital budget. ing a deep conversion-refining complex. The for vehicle technologies with new power On a combined basis it is expected that KPC emphasis is on upgrading all the fuel oil at the requirements. will spend approximately $ 9.4 billion on proj- Shuaiba refinery. On the cost side KPC’s ects in these two segments over the next 7 refineries always rank highly on cash operat- In the longer term the emergence of low-cost, years of which, $ 4 billion is for the chemicals ing costs in the Solomon analysis. reliable fuel cells and a hydrogen economy side and $ 5.4 billion on the refining side. could, of course, have further significant

40 KPC WORLD,JANUARY,MARCH 2005 implications for transportation oil demand. At ing the refinery in two stages. looking for a clear policy. Some parties are the same time, octane and additives, for In the long term, all incremental fuel require- also requesting a level of subsidies to encour- example are not important for cars that run on ments for power generation are expected to age the development of new industries, as is fuel cells. be met from the gas imports commencing the practice in some of the neighboring coun- hopefully from 2006. Full supply quantity of tries. It is also complicated by the structural the gas will be between 1-1.5bn Btu per day. element whereby KPC buys the gas from the An important area that would complicate government but then re-supplies and re-sells KPC’s ability to rapidly respond to these fast Challenges Facing Petrochemical Industry it to the power, chemical, refining and other changes is the move to a heavier and sourer industries. KPC is currently evaluating with slate of incremental crude production, mainly KPC is seeking to diversify the energy portfo- the Ministry of Energy the key parameters for from new reservoirs. This is a departure from lio to generate a greater percentage of growth setting the gas price, taking into considera- the previous heavy dependence on a single and profits from the chemical business. The tion the policies in the neighbouring coun- reservoir, namely the Burgan, for most of the idea to build an Olefins plant was first con- tries, the request of the local industries but production. In future, all incremental crude ceived in the 70’s. However, the project did also the intrinsic gas value and opportunity production from the current level will come not come to fruition until 1997. During this costs. from the new fields and the qualities of oil time KPC developed a fertilizer business, from these fields are heavier and sourer. By building urea and ammonia plants. But the The third challenge is the relatively small size 2015, the heavier crude portion, with an API real push into petrochemicals, as opposed to of the domestic market for the end products, of 24 and lower, could be as high as 800,000, fertilizers, was the joint venture with Union compared to bigger neighbours. This means with half of this being below 17 API. Disposal Carbide in 1997. This venture, which on its that KPC has to compete in the international of these heavy sour crude oils in the interna- start up was considered to be the lowest cost markets but without the low cost gas tional market may pose problems and a more producer of ethylene in the world, was also reserves of the major competitors in the economic route may be to process them unique for KPC in another way. It was the first region with their preferential pricing policies. domestically in our refineries. KPC is current- joint venture with a major international chem- At the same time, the small size of the ly studying the options to do so. ical company, and with the participation of domestic market acts as a deterrent to the Kuwaiti private sector. This has proved to investments. Investors are very open to make be a very successful business model and KPC the investments and feel comfortable in sup- Kuwait’s oil industry also needs to meet the intends to repeat it in our 2 expansion plans - plying the local Kuwaiti market, which they growing fuel requirements for power genera- a new Aromatics plant and a second Olefins know very well, but feel less confident in tion in Kuwait while aiming to run the refining complex. competing in the international markets with- sector as “merchant refineries”. The gas pro- out the same advantages. duction is limited and is mainly the gas asso- Rich in Oil, Poor in Gas ciated with the crude oil production. The net The main challenge facing the petrochemical Common Challenges gas available as fuel for power generation is industry is the limited availability of gas, as The common challenge facing both the refin- quite inadequate, when compared to the feedstock, since all Kuwait’s gas is associat- ing and petrochemical sectors is the empha- expected annual growth of about 4 % in elec- ed gas. In fact, although Kuwait is a hydro- sis on creating new job opportunities. The oil tric power demand. carbon rich country, it is also in fact a gas sector currently employs 14,000 people poor one. Since the gas is associated, its directly and 17,000 via contractors. However To meet this shortfall, and to serve as a availability is tied to the OPEC crude quota. the next few years will see the addition of strategic back up to the gas import initiatives, The LPG plant, built in the 70’s, was based on 18,000 new young nationals coming to the KPC is currently studying the building of a the previous crude production of 3 million job market every year. In the oil sector 77% of new refinery, to process heavy crude and this bpd. Today it has one train idle as the crude the staff are Kuwaitis but in the contractor could take the total domestic refining capaci- oil production is close to 2 million bpd. At the (private sector) only 9% are Kuwaitis. So KPC ty to a maximum of 1.5 million b/d. The 4th same time, with the limited gas KPC has, the is working with them to increase the percent- refinery construction will most likely be in two power generation sector has a competing and age to at least 25% within the next three stages. The first stage will be building a crude minimum need for it. This forms the back- years. topping refinery to convert all residues after ground to the recent initiatives to import gas desulfurization to low sulfur fuel oil for power from Qatar and Iran. generation. The second stage will take up The second challenge is that KPC has not yet adding deep conversion facilities to coincide developed a clear and consistent policy for with the gas import materialization. The the pricing of the gas, neither as feedstock apparent contradiction of producing fuel oil nor as power. There are currently different for power generation and also achieving deep levels of pricing and the parameters were set conversion for domestic refining will be a long time ago. At the same time, it can be resolved with the import of gas and by build- confusing to the small investors who are

KPC WORLD,JANUARY,MARCH 2005 41 • Strengthen the world class reputation of all KPC’s operations.

• Encourage continuous learning in all areas related to KPC’s businesses. KPC’s Strategic Directions • Become a regional leader in HSE perform- ance and apply the latest and the most appro- Towards Encompassing priate technologies in KPC’s operations. Here is a summary of KPC’s strategic direc- Development tion in its determination to attain further suc- cess and progress. KPC’s mission statement states that it is a and technical expertise and proactively man- Reserves corporation of economic character, run on a aging the environmental, health and safety commercial basis and fully owned by the aspects related to KPC’s businesses. Also, • Compensate for the crude oil produced by state. It is one of the world’s major oil & gas KPC has responsibility to the Health, Safety adding proved reserves, by exploration and companies and its activities are focused on and Environmental ( HSE) aspects of its busi- improvement of oil recovery from existing petroleum exploration, production, refining, nesses and aspires to manage KPC’s busi- reserves, equal to average production of the marketing, petrochemicals, and transporta- nesses according to the best industry prac- previous three-years. This is to maintain a tion. tices in HSE , both in terms of targets and cost level of reserves that will meet the future effectiveness, so as to ensure the protection requirements of crude oil. This direction KPC strives to manage and operate these of the environment and the health and the should be reviewed every 5 years. integrated activities worldwide in the most safety of employees and customers wherever efficient and professional manner, in addition KPC conducts its businesses. • Follow good and proper best practices in to growing shareholder value whilst ensuring reservoir management to produce crude oil the optimum exploitation of Kuwaiti hydrocar- KPC’s vision is to: and gas in the most efficient and cost effec- bon resources. • Be a highly profitable and performance driv- tive means. en company. The Corporation has an important role in con- Natural Gas tributing to the support and development of • Contribute significantly to the support and • Maximize the exploration, development and the Kuwaiti economy, developing national development of the Kuwaiti economy. production of non-associated natural gas. manpower, maintaining superior commercial • Adopt a zero flaring policy for both onshore

42 KPC WORLD,JANUARY,MARCH 2005 a unified and seamless manner.

• Investing in capital projects outside Kuwait that will strengthen KPC’s competitive posi- tion in international markets.

• Providing secure and economic outlets for the disposal of Kuwaiti heavy crude. • Develop and upgrade petroleum product Petrochemicals export facilities inline with the target refining • Maintain the fertilizer business and improve capacity. its operating efficiency until exiting in the medium term, through either privatization or • Evaluate potential expansion into the lube and offshore operations, targeting 1% gas base oil business. flaring by 2005. • Maximize integration between the refineries Domestic Downstream and petrochemical activities by using refinery • Expand refining capacity in Kuwait to 1.0 outputs as feedstock for petrochemical proj- MMBPD with deep conversion by 2010. ects and using petrochemical return streams in the refining operations. • Study expansion of refining capacity in Kuwait up to 1.5 MMBPD by 2010. This study Crude Oil and Bulk Products Marketing should take into account the following : Provide crude oil and petroleum products that meet customer demands, while ensuring the • Meeting future MEW fuel requirements, in optimum return to KPC and the State of case the negotiations of gas imports from Kuwait accordingly. This will be achieved in neighboring countries have failed. part by: closing down the business. • Providing strategic back-up for gas imports • Focusing on customer satisfaction and • Pursue growth in petrochemicals, both through building additional deep conversion offering high level of services. inside and outside of Kuwait, with a focus on refining capacity, in case the negotiations of high growth petrochemical products such as gas imports from neighboring countries have Aromatics, Olefins and their downstream succeeded. products. • Pursue full and effective integration • Disposal of heavy fuel resulting from refin- between the petrochemical operations and ing operations using the latest available tech- KPC’s operations inside and outside Kuwait nologies, such as IGCC and others. through utilization of KPC’s operation outputs (such as refining) as feedstock for petro- • Processing Kuwaiti heavy crudes through chemical projects. refinery expansion. • Build and acquire leading petrochemical assets in mature markets outside Kuwait with • Assessing petroleum products supply/demand • Meeting future international markets a proper foreign partner, leverage the techni- in international markets, especially in KPC’s tar- demand in terms of volumes and specifica- cal and marketing skills of mature markets geted market. tions. into new petrochemical projects in emerging growth markets. Preference should be given • Operate domestic refineries in an effective • Strengthening KPC’s competitive position to petrochemical projects that are linked to and flexible manner that is in line with in the international markets . Kuwaiti hydrocarbon resources. changes in international oil markets and • Pursue partial or full privatization of the achieve maximum added value. This will • Evaluating best practices in marketing petrochemical activity. This should include involve adjusting utilization of the refineries activities and its appropriateness to KPC’s participation of a foreign partner. according to market conditions and changing operations. product slates to maximize value. Transportation • Improving value chain optimization between • Set the minimum size and • Meet international markets demand of crude oil production, refining and marketing. configuration of the fleet to petroleum products and upgrade petroleum provide strategic cover for products quality to meet the future required • Coordinating feedstock supply to KPC’s shipping crude oil, petroleum product specifications. operations and the transportation process in products and LPG to interna-

KPC WORLD,JANURAY,MARCH 2005 43 tional markets in crisis situations and inline with international market requirements.

• Within the above strategic cover limitation A.Europe: on the fleet, provide an economic and reliable • Pursue performance improvement in order source of CIF transportation for Kuwaiti car- to achieve acceptable returns in line with the gos. peer group, taking the following into consid- eration: • Manage the fleet to the highest standards of efficiency, effectiveness and flexibility (i.e. • Enter into investment opportunities that are operate, charter to third party or buy/sell ves- commercially viable and have acceptable sels) to meet changes in marketing require- returns in line with the peer group, giving ments and to be economically viable. preference to investment opportunities that provide a secure outlet for Kuwaiti hydrocar- • Initiate a business process reorganization bons. • Adopt a growth platform approach in enter- effort for the transportation activity focusing ing investment opportunities and identify on the processes and links with International • Give preference to JV/alliance investment future opportunities related to the growth Marketing to improve the efficiency of this opportunities with IOCs. platform at the time of the initial investment. activity. • Explore merging current KPC’s operations • Study different options to dispose of Kuwaiti • Pursue partial or full privatization of trans- in Europe with competitors’ operations in heavy crudes. portation activities, marine agency and the major European markets through a LPG bottling plant. JV/Alliance or multiple JVs/Alliances in order Other Strategic Directions to improve performance and achieve future Overall Performance International Downstream growth. • Achieve high levels of performance Pursue Downstream growth outside Kuwait to • Divest non - profitable operations. throughout KPC activities that are in-line with grow earnings and create value. the average performance of IOC peers. • If the above objectives are not achieved • Pursue motivation of employees through within the short term (5-6 years), then KPC’s applying a reward/discipline system in order direction for this activity will be reviewed. to improve performance. • Achieve a Return on Capital Employed in- B.Outside Europe: line with the average Return on Capital • Enter into investment opportunities that are Employed for the peer group, but adjusted for commercially viable and achieve acceptable KPC’s special situation. returns in line with the peer group, taking the following into consideration: Human Resources • To foster and maintain KPC’s employees • Focus on investing in major high growth and consider them as the main resource for strategic markets especially in Asia and in KPC and its subsidiaries. To create a distin- regions that strengthen and sustain KPC’s guished working environment that continually current markets. encourages and develops loyalty and dedica- tion. • Give preference to investment opportunities that provide a secure outlet for Kuwaiti hydro- • To fully rely on competent Kuwaiti employ- carbons. ees to manage and operate all KPC sectors and other supporting sectors without nega- • Give preference to JV/alliance investment tively affecting KPC’s performance and oper- opportunities with IOCs. ations.

44 KPC WORLD,JANUARY,MARCH 2005 • To achieve a competitive position in the Other Strategic Directions order for KPC to become a regional leader in local and regional markets through develop- • Develop systems that provide the optimum HSE performance. ing and applying the latest Human Resource levels of financial services including tax plan- policies, systems and processes. In addition, ning according to best professional practices Risk Management link performance management with salaries to support the strategic objectives for the Develop and apply common approaches and and incentives to achieve KPC’s goals. operating businesses. policies to manage all risks facing KPC in the most efficient and effective manner. • To change the concept of Human Resources • Establish optimal financial structures and and corporate culture and enhance KPC’s val- provide necessary financial resources to meet Technology ues towards teamwork and innovation in the cash demand over time of KPC and its • Establish processes to manage and apply order to achieve KPC’s Vision. subsidiaries’ plans and programs with the the latest technologies throughout KPC’s lowest cost and proper timing. businesses. • To optimize utilization of KPC’s human • Anticipate future needs of the latest tech- resource capabilities to let them achieve the • Ensure meeting the need for working capi- nologies and applications throughout KPC’s highest level of performance. tal and manage cash flow from operations businesses. efficiently in order to minimize cost and max- • Develop skills and expertise to use the lat- • To increase KPC and its subsidiaries’ con- imize returns. est technologies and applications. tribution to the development of Kuwaiti socie- • Improve the process of applying the latest ty through creating new job opportunities. • Manage KPC’s financial investments and relevant available technologies and applica- cash surpluses within proper structures and tions. Other Strategic Directions arrangements over time in order to support Training & Career Development KPC’s strategic objectives and within an Research • Reach an international level of performance acceptable framework of risk tolerance and • Develop a comprehensive long-term plan through enhancing and developing the skills approved standards. and program for investment in research and and competencies of Kuwaiti manpower in development. KPC and its subsidiaries. • Maintain an effective system for managing the risks of financial resources and invest- • Strengthen the coordination with local • Approve training and development as an ment. research institutes and organizations on integral part of KPC’s Human Resource strat- studies, researches and information related to egy. • Maintain regulatory systems and proce- the oil industry. dures that protect the financial resources and • Consider training and development a provide information/ data with the highest Information Technology shared responsibility between managers, level of transparency. • KPC will be a regional industry leader in employees and training/career development applying the latest relevant information tech- departments. • Enhance financial performance to ensure nologies that will enhance its performance, achieving KPC’s strategic objectives that are improve its efficiency and reduce its operat- • Focus on training and development as a comparable with the levels of the interna- ing costs in a highly secure manner. value added investment essential to the tional oil industry. future of KPC’s businesses. • Pursue total integration of business Business Model processes across KPC and its subsidiaries in • Focus on training, development and profes- • Redesign and reorganize the business order to achieve the optimal use of the corpo- sional qualification as a tool for promotion processes of KPC and its subsidiaries to rate information database, findings, skills and and career progression. improve performance, efficiency and effec- experience among KPC and its subsidiaries tiveness. (knowledge sharing and management). • Develop the Petroleum Training Center to • Develop common policies and procedures international standards to accommodate KPC related to HR, HSE, etc. in order to be applied • Achieve a high standard of IT competency and its subsidiaries’ training needs. by KPC and its subsidiaries, allowing flexibili- for KPC and its subsidiaries work force to ty in specific areas to be inline with the nature enable them to gain maximum benefits from • Consider the motivation of employees for of KPC’s activities. information technologies , enhance their per- self-initiated and self-directed learning a formance and efficiency, and achieve overall basic requirement to achieve KPC’s goals. Heath , Safety and Environment ( HSE) KPC’s objectives accordingly. • Comply with local HSE standards and regu- • Maximize utilization of governmental and lations. • Adopt and apply approved private universities and institutes to qualify • Pursue application of the best and most internet based initiatives in KPC Kuwaiti employees. appropriate international HSE standards in and its subsidiaries to become

KPC WORLD,JANURAY,MARCH 2005 45 a driver for profit increase and cost reduction • Continue evaluation of outsourcing some • Setting a clear and specific privatization (i.e. e-business, e-commerce, e-learning, e- KPC activities. policy, systems and procedures by the State employment and similar). with clarification of the following: • Concentrating on implementing projects • The role of KPC and its subsidiaries after • Maintain back-up for all systems and data- and spending capital locally. privatization. bases. Build and maintain disaster recovery • Hydrocarbons pricing policy. and business continuity plans. • Encouraging the private sector to utilize the • The future of national manpower. output of KPC operations to establish down- • Maintain an active coordination and cooper- stream industries. “Must Dos” to Implement KPC’s ation mechanism between KPC and its sub- Strategic Directions sidiaries to achieve an integrated IT strategy Internal Key Success Factors: and build a shared services centre • Commitment of the KPC Board to KPC’s KPC’s Mission / Vision: Commitment to KPC’s Mission, Vision, Values and Strategic Mission, Vision, Values and Strategic Other Strategic Directions Directions. Directions. Contribution to Local Economy • Accountability of the Chief Executive Officer Targets: Set clear, challenging and measura- • Increase KPC’s contribution to the growth and Managing Directors, each in his area, for ble short-term / long-term targets focusing on and development of the local economy implementing appropriate strategic plans to profitability related targets. through creating viable investment opportuni- achieve KPC’s Strategic Directions. ties for private sector as follows: Organization: Redesign and reorganize KPC’s structure to focus on performance, accounta- • Evaluating privatization of KPC activities. • Allocating the appropriate financial and bility and autonomy and to create a sense of human resources to implement KPC’s deep ownership to KPC. Strategic Directions. Processes: Reorganize the processes to improve efficiency and effectiveness. External Key Success Factors: • Alignment between KPC’s vision and the Performance Feedback: Implement a trans- Supreme Petroleum Council’s (SPC) vision on parent performance feedback process to managing KPC’s activities on a commercial achieve the strategic objectives. basis. • Clear vision on the roles, functions and Management: Implement clear management processes which are quick and performance related through applying a reward / discipline system.This is to improve performance and to assign the right person in the right place.

Culture: Develop a high performance culture that will insure achievement of strategic objectives.

• Increasing participation of the private sector Resources: Develop capable and qualified in KPC’s activities and operations in a way employees and provide the funding required consistent with the strategic nature of the oil to implement KPC’s Strategic Directions. industry. authorities of the SPC, KPC and the Ministry • Increasing dependence on the private sec- Of Oil. tor in contract,engineering and support serv- • Political support for the major strategic ices, giving priority to companies that employ projects that will have a significant impact on the highest number of Kuwaitis. the state economy.

46 KPC WORLD,JANUARY,MARCH 2005 At the time when the oil sector is entering a new phase of expansion and development, it is also concurrently witnessing a construction boom. KPC and most of its subsidiaries are adding the final touches to new headquarter Construction buildings. After years of renting office areas in commercial buildings, the oil companies will relocate to their new office buildings that combine aesthetic design with utility. This stems from a keen desire to ensure the most appropriate and comfortable work environ- ment that is conducive to productivity. The BOOM following report highlights the new office buildings of KPC, KNPC and KOC.

Oil Complex

In the heart of Kuwait’s Capital, overlooking the beautiful Arabian Gulf coast stands a very magnificent building whose final finishing is in progress. The building is the long awaited new oil complex, which will unite all KPC employees under one umbrella. The spectac- ularly designed building is expected to become one of the architectural landmarks of Kuwait and one, which embodies KPC’s image in harmony with its achievements. In addition to KPC employees the complex will also include Ministry of Energy employees.

KPC WORLD,JANURAY,MARCH 2005 47 Ever since its establishment in 1980, KPC has occupied scattered offices in Al Salhiya Complex in Kuwait City. The increase in employees and departments, forced KPC to rent additional offices in the nearby Anwar Al Sabah Complex, Al Sahab Complex, and the Al Salam Tower. KPC’s management was keen to construct a building that is truly aesthetically unique and has all the modern safety systems, and everything to ensure the ideal work environ- ment for the employee, comparable with the best that can be found to be seen anywhere in the world. The work place is designed to provide optimum lighting, sound insulation KNPC’s new office headquarters and privacy. A luxurious cafeteria, directly overlooking the magical waters of our Gulf adds a new dimension to the experience of working at the Oil Sector Complex, as employees can have their meals while they are at work. A bank branch and a travel office add further convenience for the benefit of the employees. A number of elegant, well-fur- nished meeting rooms, a modern dealing room equipped with state-of-the-art commu- nication and other equipment, a sophisticated information centre and free, shaded parking are only a few of the main benefits.

New KNPC Building

KNPC’s new office building has been KOC’s office building described as “an architectural piece of art”. It stands out due to its application of modern The building consists of a basement, and 6 main office headquarters. The design bears a concepts of design, construction, and tech- floors. The basement is designed to accom- loose resemblance to a university campus. It nology. It is strategically position on the out- modate electrical, mechanical and air condi- will include 6 adjacent buildings each con- skirts of Ahmadi city in proximity to Ahmadi, tioning services, water tanks and some sisting of two floors except for one building Shuaiba and Mina Abdullah Refineries, stores. The ground floor is designed to with three floors. The building will accommo- The project’s façade takes unique architec- accommodate a cafeteria, auditorium, the- date around two thousand employees. It will tural shape. The building looks like a huge atre, library, place for prayers and a clinic, in also include a mosque, cafeteria, reception model of half a violin. It lies between two addition to the main entrance and the offices hall, and other service buildings. opposite angles on a semi rectangular piece of the General Services Department. The of land. Its total land area is 4120 square administrative offices are distributed from the The six buildings are divided to accommodate metres with the constructed area occupying ground floor to the fifth floor, where higher departmental groups and are all connected by 5500 square metres only. The rest is distrib- management offices are located. air-conditioned bridges. The scenic office uted between aesthetic scenes, a water pool compound will include large expanses of and car parking. Ahamdi City is expected New KOC Office Building greenery, water fountains, and glass aper- soon to inaugurate, exactly at its entrance, tures, which allow natural light to permeate this architectural piece of art for one of KPC’s By the end of 2006, a new KOC office build- the offices. subsidiaries, which will provide the area with ing is expected to be completed in Ahamdi one of the most advanced edifices in the oil City. The new building will have an innovative sector anywhere in the world. architectural structure and is built near KOC’s

48 KPC WORLD,JANUARY,MARCH 2005 Investing in the Human Element

KPC believes that its real wealth is not only in The Corporation’s mission is to support and major added value for investment in the its hydrocarbon wealth rather that its biggest promote the role of the national labour force future business of the Corporation, emphasiz- asset lies in its human resources who con- at all levels, and to encourage personal initia- ing the important of professional development tribute to the development of the oil industry tives for education and development in the oil as a means to advance and gradually reach and the best exploitation of the “black gold.” sector. The Council formulates training poli- the highest professional standards, and in In translation of this, KPC has drawn up a cies and plans, and reviews them annually. It maximising the benefit from private and pub- comprehensive training strategy which aims also devises the general strategy for training lic educational institutions and universities to at training, developing and upgrading the for the oil sector. develop Kuwaiti executives. competences of national executives. KPC established a Supreme Council for Training KPC seeks to reach a world level of perform- Mobilizing Potential and Education to supervise the implementa- ance by developing and promoting the skills tion of training and career structures and capabilities of the Kuwaiti manpower in With respect to the training strategy of the oil designed for all the oil sector employees. This the corporation and its subsidiary companies. sector, Sheikha Shatha said “it is indeed a Council is headed by the Managing Director It considers this education and development a huge challenge to realize the requirements of for Training, Sheikha Shatha Nasser Al- responsibility to be shared equally by all oil this strategy which are based on modern Sabah. sector managers and employees. It further international criteria and standards, and focuses on education and development as a which have now come to govern training sys-

KPC WORLD,JANURAY,MARCH 2005 49 tems and methods. We are moving in the stipulate that a minimum of right direction and are determined to make 25% of the contractor’s man- the required qualitative leap, in order to meet power should be Kuwaiti. This the oil sector’s needs for training programs and other factors within the and to render the best training services to the Corporation make a strong case staff of the oil sector while taking into account for building up training capabili- all the requirements and needs of our compa- ties in the oil sector. nies during the implementation of the plan.” Work to expand the existing Sheikha Shatha added “KPC seeks to adopt Petroleum Centre commenced on best world practices in its work, and consid- 22 December 2001 and the building prominent ers human resource investment and national was completed and fully equipped by position of Kuwait Petroleum manpower development in the oil sector a top the end of 2003. It cost around KD Corporation. Another benefit of the project is priority in ensuring added value for the sec- 2.220 million to build. The new building con- the grouping of the Centre’s employees in one tor.” She pointed out the strong link between tains 29 training rooms, including 7 laborato- building instead of two. education, development, human resources, ries and computer rooms, as well as an and health and safety systems at KPC. She amphitheatre or conference room which can The Centre applies state of the art technology emphasized that the measurement and accommodate 110 persons; the building is in its service provision. It also has a website assessment of the training output were car- fitted with all the training equipment including on the Internet which is regularly updated and ried out according to international standards equipment for hosting conferences via satel- all its training programs are available on the and followed best world practices. lite and interpretation services in four lan- website. The Centre also uses SMS text mes- guages. saging to promote the training programs and The major achievement of the Corporation in give information about the sessions to terms of developing staff capabilities in the The project also includes shaded parking for trainees. sector is the expansion of the Petroleum 525 cars, 25 offices for employees, two cafe- Training Centre at Ahmadi. With the expan- terias each containing 100 to 120 seats with One of the aims of the Centre’s management sion of the Centre, which serves all the sub- all the associated services, and a library with is to ensure the availability of trained and sidiary oil companies, new horizons have a room for research and studies. Under KPC’s qualified national manpower to work with been opened for training and its duty of cater- five-year plan, some 55,000 employees will contractors. At present, the main problem ing for present and future needs of the oil receive training at the centre between 2002 confronting the contractors is the lack of sector in line with the corporation’s develop- and 2007. qualified and trained manpower. The man- ment plans. agement of the Centre is currently preparing Simultaneous Development Projects the workshops in collaboration with several The decision to expand the Petroleum bodies such as the body in charge of national Training Centre to accommodate the increas- The expansion project coincided with the manpower affairs, the Corporation and the ing number of trainees every year is in workshops air-conditioning project and the contractors to pave the way for any training response to wider trends in national strategic construction of training rooms, thereby project it might be called upon training policies, particularly after the creation increasing the capacity of workshops and to implement. of the Supreme Council for Education and ensuring a better training. Furthermore, the Development. An effective translation of this new building enhances the image of the is KPC’s decision that all oil sector contracts Centre, and brings it more in line with the

50 KPC WORLD,JANUARY,MARCH 2005 KPC: A Company Environmental Contributions Supporting Jaber Al-Kuwait Reefs

that Cares KPC contributed to sponsoring the most important marine environmental project in KPC is a multifaceted Company. Its strength stems from its deep rooted social responsi- Kuwait, which was Jaber Al-Kuwait Reefs and bility and determination to bring about a difference wherever it conducts its business. In more specifically the Grand Reserve of many parts of the world KPC is the sole representation of the State of Kuwait, which Bnaidar. The marine reserve is still viewed as deepens its resolve to raise the name of Kuwait on the local and international levels. a major national voluntary project for the cre- The following report reveals the humanitarian side of the Corporation and sheds light on ation of an underwater national park and some of the social activities undertaken by the Corporation. development of settlements for coral reefs, fish and other sea creatures.

The project was overseen by the Kuwait Dive Team which had created 19 artificial reserves for coral reefs and fish. The reefs were made of treated concrete and weighed 900 tons. They were placed on the sea bed at particular depths which are suitable for different species and included 6500 holes which were designed to act as shelters for fish and vari- ous sea creatures.

The main reasons for creating artificial reserves in Kuwait are the lack of favourable factors for the building up of natural coral reefs, the limited area and distribution of the existing reefs, and the natural and human destruction of the reefs. Coral reefs are very important because, not only do they provide a shelter for fish and other marine creatures, they are one of the most important links in the marine food chain and serve as a store of nutrition for the seas. They also represent a national and touristic wealth while constitut- ing aquatic natural gardens made of marine materials.

As well as providing a suitable environment for the growth of corals and for the settlement of fish, it is hoped that the Bnaidar reserve will attract amateur divers and raise their awareness as they watch the growth of the coral reefs, and reduce the impact of divers’ presence on the natural coral reefs.

Beach Cleanup Campaign

In conjunction with the Corporation and its subsidiaries’ concern to preserve the marine environment, protect marine life and curb all forms of marine pollution, the Corporation launched a campaign to clean the Kuwaiti

KPC WORLD,JANURAY,MARCH 2005 51 Sheikh Talal Al Khalid honouring academically exceptional students at Mishref area in Kuwait.

beaches and islands in cooperation with Dive Investing in Future Generations National Union of Kuwaiti Students at Kuwait Caroline and several private companies and University. The maiden project provided on schools. Sponsoring the “Be Ambitious” Project the job training opportunities and summer jobs for all its participants as a preparatory This beach cleaning campaign witnessed the KPC plays an active role in supporting educa- step for their professional careers. participation of 160 children aged from 6 to 8, tional programmes aimed at training young Participants were given work placements in from 6 different schools. Involving children in Kuwaiti people and honing their skills through private sector companies and establishments this kind of cleaning campaign is the first practical experience. It recently sponsored in the fields that were relevant to their spe- such initiative supported by KPC, and falls the “Be Ambitious” project, organized by the cializations. At the end of the exercise, every within the framework of the Corporation’s efforts to raise environmental awareness among all social groups. By allowing the par- In 2003, KPC launched a pio- ticipation of children in the cleaning cam- neering educational publication paign, KPC aims at implanting the right social called the ‘Story of Naftan” aimed values in the children’s minds and raising at schoolchildren. Through simple their awareness of the importance of preserv- narrative and attractive images, the storybook ing the environment. explained the processes of producing and refining oil and its various uses in day-to-day life. The book was The campaign also included cleaning the written by Dr. Zahra Hussein and illustrated by talented Kuwaiti islands of Kubbar, Qaruh and Um al Kuwaiti artist Ghadah Al Kandari.The book aimed to cre- Maradem with the participation of volunteer ate awareness amongst children of the importance of oil divers. and its integral role in Kuwait’s economy and society and also to educate them on science issues in a simple yet effective manner.

52 KPC WORLD,JANUARY,MARCH 2005 As a token of appreciation to Kuwait’s first generation, KPC organized a special event The Public Relations Department organized a field trip for the children to honour residents of the social welfare. of KPC employees to KOC’s exhibition in Ahmadi to instil oil culture. student received a financial reward and a cer- goals and introductions to its business, to its also contained pictures of the most important tificate of experience. subsidiaries and to the activities undertaken visits by eminent personalities and Heads of by the Corporation and their importance as States to this creative exhibition. Summer Student Employment Project the vital mainstay of the national economy. The lectures focused on the Corporation’s Supporting Annual Diving Trip KPC also sponsored a summer program vital social role in terms of its sponsoring of organized by the Touristic Enterprises several activities and events which include The Corporation annually sponsors a diving Company to employ high school students. several summer training programs for stu- trip, organized by the Sea Sports Club under This sponsorship was in line with the dents and its contribution to the raising of a the auspices of His Highness Sheikh Jaber Al Corporation’s earnest desire to support all generation aware of the importance of KPC Ahmad Al Jaber Al Sabah, to commemorate social activities that serve Kuwaiti society, and the oil sector and able to face future chal- the traditional occupations of the Kuwaiti and help young Kuwaitis occupy their free lenges. ancestors. time with constructive work. The Corporation’s support of the project was a Raising Children’s Oil Awareness The Corporation’s support for the diving trip is national initiative aimed at raising a genera- in line with the wish of His Highness the Amir tion able to carry out its future duties. In order to promote the oil culture among of Kuwait to celebrate Kuwait’s marine her- Kuwaiti youth and reinforce the social bonds itage, commemorate our ancestors and to The Corporation believes that investing in the among the children of the Corporation’s renew our pride in all their sacrifices and con- young people of Kuwait, the real wealth of the employees, the Department of Public tributions. This event reinforces the spirit of country, is a real investment that boosts and Relations organized a visit to the Kuwait Oil belonging and the sense of loyalty to this pre- develops the students’ capabilities, skills and Company exhibition in Ahmadi. cious country. The diving trip also strength- sense of responsibility in a practical and pro- ens the strong bond linking the present young fessional manner alongside the academic The trip included the showing of a documen- generation to the glorious heritage of this education they receive at school. tary film about the widespread destruction country, with all its hard times and difficul- and barbaric acts committed during the Iraqi ties, so that the young people will learn les- Oil Lectures for Students invasion and occupation of Kuwait, in partic- sons, values and virtues from the past and ular, the torching of the oil wells, and includ- use them along their life’s journey. They will Pursuant to its mission of raising awareness ed scenes of the heroic acts of the Kuwaiti also learn toleration, patience and how to rely of the Kuwaiti oil industry, KPC organized a teams which brought the fires under control. only on themselves and on God Almighty. series of intensive lectures for Kuwait They will reinforce their sense of loyalty University students on the nature and the role Afterwards, the children visited the exhibition towards this country and increase their of the Corporation in the management of the which uses a variety of pictures and working knowledge of the historical bonds which link oil sector activities through its subsidiary oil models to illustrate the process of oil forma- them to the young people of the other GCC companies. The lectures also included a tion and extraction and the equipment used in member states. detailed explanation of the Corporation’s extinguishing the oil well fires. The exhibition

KPC WORLD,JANURAY,MARCH 2005 53 Humanitarian Footprints Indonesia In order to spread education and provide bet- in Foreign Soil ter living conditions for the local population, KUFPEC built several schools in the Syram field and the Paula region in Indonesia. The Through the international operations carried a regular income. The Corporation also company equipped the schools, manned out by its subsidiary companies such as grants scholarships to Pakistani students them with qualified teachers and covers all Kuwait Foreign Petroleum Exploration allowing them to study in the University of the school expenses. The schools provide Company (KUFPEC), KPC seeks to build and Karachi. free education to the local children and maintain friendly relations with host states employment for the local labour force. and to leave a mark which is testimony to the KUFPEC printed environmental leaflets about extent of its cooperation with these states. the nature reserves in the Karthar region to Tunisia raise awareness of the importance of protect- Pakistan: ing rare animals and birds and has built ten The mark left by KPC and KUFPEC in Tunisia water basins in different areas to protect and is quite unique by any standards. KUFPEC KUFPEC has launched a number of charitable support wildlife. contributed to the construction of a huge enterprises to help the Pakistani people. The mosque with a distinctive architectural style company has built and finances two medical The Corporation also made donations to the that stands out as a prominent clinics in the Kerthar region of Pakistan. They Pakistani government, in the aftermath of the landmark in the capital. The provide basic medical services to the local Sind River floods, to help in the relief and res- mosque is highly appreciated people as well as training for young girls to cue operations. by both the government and enable them to work in such clinics and earn people of Tunisia.

54 KPC WORLD,JANUARY,MARCH 2005 All industry outlooks unanimously confirm that the Kuwaiti oil sector is standing on the New threshold of a bright new era of progress and prosperity. What with large projects already in motion and bigger ventures all set to start, Era of Progress, KPC’s present and the future never looked brighter. The strategic directions for the year 2020 indicate that the only way to go from Prosperity this point onwards is up. To ensure the appli- cation of all strategic plans, KPC and its sub- sidiary companies are operating in two paral- lel lines: on the one hand, continuously devel- oping existing operations, while on the other, launching a number of major projects to strengthen the sector’s business for several decades ahead.

The Corporation announced the start of sev- eral big projects and investment opportunities that will ensure the enhancement of upstream and downstream activities, creation of new job opportunities, bigger dividends for the oil sector, and competitive investment opportunities for the private sector.

Market analysts observe that there is a strong sense of optimism, which prevails in the oil sector and Kuwait in general. They believe that Kuwait has positioned itself as the Gulf’s new commercial gateway. It is driven by an increasing desire to modernize its infrastruc- ture and launch development projects direct- ed toward increasing and developing its sources of revenues and achieving a more active national economy. The decision mak- ers at KPC recognising that the Corporation is an integral part of the economy of Kuwait, are looking forward to enhancing production and processing capabilities in various areas in order to increase revenues, distribute income and strengthen Kuwait’s position as a major global energy producer.

Huge Forthcoming Projects There are several key projects in the pipeline that were launched by the Ministry of Energy and the Corporation. These projects include plans to enhance refining capacity, and KD 3.3 billion has been ear-marked for the build- ing of a new refinery to raise the refining capacity to a million bpd. Another project is to build a new pier and to upgrade the Northern

KPC WORLD,JANURAY,MARCH 2005 55 Export Pier at Ahmadi Refinery. With regard to exploration and production, several large projects are being executed at a total cost of KD 6.5 billion in order to increase production capacity to 4 million bpd. These include an increase of production through Kuwait Project to develop the northern fields with the assis- tance of international oil companies.

Furthermore, KPC has optimistic expectations for several large petrochemical projects with a total cost of KD 1.8 billion, including the Aromatics and Olefins Complex, and also in electricity and water development, where the Ministry of Energy has plans for large projects in transmission networks and distillation plants at a cost of several hundred million Dinars. develop the new cal factors and preserving Major Energy Projects Program aromatics and the environment, and olefins projects, finally, improving contrac- As it commemorates its silver jubilee, KPC preferably with joint tual relations with our has entered a major phase of expansion in the venture parties, and partners, both financiers oil sector in Kuwait. Recent estimates of long- to focus on the and contractors. These term oil demand from the IEA indicate that chemicals with high targets are challenging to world demand for oil will increase from the growth potential. say the least, however, there is strong deter- current level of 80 million bpd to 120 million These three plans alone will require KPC to mination to carry them out. bpd over the next 25 years, and with the spend about 11.6 billion KD or close to 40 bil- Middle East holding half of the world’s oil lion dollars over the next 20 years. This num- Fourth Refinery reserves, it will meet at least two thirds of the ber would increase by another $5 billion, if increase in demand. It follows that this will KPC targeted 5 million bpd. The Supreme Petroleum Council has given require an increase in capacity from Kuwait. the green light to building Kuwait’s fourth As mentioned earlier according to KPC’s Exploration, Production refinery which will positively enhance refining strategic directions until the year 2020, the oil capacity as per strategic directions. The idea sector seeks to achieve the following goals: According to a study released by the IEA, oil of establishing the fourth refinery was con- companies will have to invest up to $5.3 tril- ceived due to the expected increase in petro- - In the upstream sector to reach a crude oil lion over the next 30 years to supply the leum products. Around six years ago, KPC production capacity of 4-5 million bpd world’s increasing demand for oil and natural and its subsidiaries commenced plans to - In the downstream, to study the expansion gas. That would include $2.2 trillion in invest- establish a fourth refinery. The project gradu- of refining capacity up to 1.5 million bpd by ment for new oil production, as worldwide ally began to crystallize, until it reached its 2010, whilst meeting the local energy demand for oil surges to 120 million bpd by current stage of maturity. The ambitious proj- demand, and using the future heavy oil avail- 2030 from 77 million bpd in 2002. ect attained the consensus of the oil sector’s ability. Upper Management and the Supreme - In chemicals, to expand inside KPC is set to expand its production capabili- Petroleum Council. Kuwait, into chemical projects ties in such a way as to maximise return on Prior to getting the nod of approval from the integrated with oil activities and the invested capital, while observing ecologi- Supreme Petroleum Council, the project went

56 KPC WORLD,JANUARY,MARCH 2005 Daewoo and Hyundai companies. According to the agreements both companies will build 7 oil tankers in total. The first contract with Daewoo covers the building of one AFRAMEX oil tanker of 114,000 tons capacity, to carry oil products, and two PANAMAX of 69,000 tons capacity each to carry oil products. Hyundai Company will design, build and hand over four tankers to KOTC: two Very Large Crude Carriers (VLCC) of 317000 tons capac- ity and two Very Large Gas Carriers (VLGC) of 82000 cubic meters capacity for carrying ammonia and liquefied gas KOTC owns only two double-hulled tankers. The standard of the company in this respect is lower than that of other tanker owners in the Middle East and around the world; an important factor in forcing KPC to proceed with the company plans to upgrade the fleet. The signing of the contracts is regarded as a major achievement and a positive progress in through different phases. The decision to sulphur and other harmful impurities into the upgrading the company fleet. Replacing the replace heavy fuel with more environmentally environment, simply because they use heavy old ships will, in turn, open new horizons and friendly gas and the need to meet the State’s oil. It is also expected that the new refinery pave the way for a prosperous new future for electricity consumption demanded the pro- project will create more job opportunities for the Oil Tankers Company, increase the gener- posals to import gas from neighbouring ‘gas national workforce to absorb graduate techni- al efficiency and performance of the compa- rich’ countries such as Qatar and Iran. Then cians, administrators and others. ny, and strengthen opportunities for competi- several elements led to the speeding up of the tion on global markets. Undeniably, the inter- refinery project: the first of these being the The refinery project is part of KPC’s long-term national oil transport industry is facing a great Ministry of Electricity’s construction of the strategic directions, which aim to increase challenge in implementing the stringent HSE power generating station at Zor, which will be future refining capacity. standards concerned with protecting the ready in 2007. It is estimated that 200,000 environment from pollution and oil leakage. barrels of fuel oil per day will be needed. New Oil Tankers Because of the strict laws related to marine environment protection, there is an increasing Additionally, it was felt that it was important This unique project will ensure that all new demand for modern double-hulled tankers, to build a fourth refinery to meet the strict tankers will be compliant with all internation- which has kept the lease prices of tankers environment regulations imposed on petrole- al standards and will fulfill KOTC’s objectives high during the year. um products. Enhancing HSE performance to remain a regional leader. The company is also facing many challenges. has become a top priority for the oil sector so KOTC has recently begun implementation of The cost of building new tankers has risen to it was important to apply new environment the plan for the upgrading of its oil tanker the highest levels during the past ten years friendly capabilities. fleet and replacing its single hull tankers by because of the continuous increase in steel signing contracts for the building of seven prices resulting from the global economic Currently, some existing power stations emit new tankers of the latest specifications with

KPC WORLD,JANURAY,MARCH 2005 57 revival and the huge demand in China for steel for its construction and manufacturing industries

EQUATE 2

On the lines of the successful EQUATE petro- chemical venture, the Petrochemical Industries Company (PIC), a KPC subsidiary, and the Dow Chemical Company (DOW), announced the formation of two new joint ventures that are designed to further develop their commercial relationship in the petro- chemical industry. Subject to regulatory review and customary approvals, Dow and PIC will form: MEGlobal, a 50/50 global joint venture for the manufacture and marketing of merchant monoethylene glycol and diethyl- ene glycol (EG) and Equipolymers, a 50/50 Privatization of Fuel Stations global joint venture for the manufacture and marketing of polyethylene terephthalate The process of privatizing the fuel stations is resins (PET) and the manufacture of purified going smoothly within the set framework and teraphthalic acid (PTA). plans. A new company to manage the stations has been established and KPC owns 24% of PIC and Dow propose to construct: its shares. It will oversee the operation of 40 • Olefins II, a new ethylene and derivatives reach one million stations. It is expected that this project will complex in Shuaiba, Kuwait. ton per annum of create a competitive environment and bene- • A new ethylbenzene/styrene unit in granular urea pro- fiting consumers as well as promoting various Shuaiba, Kuwait. duction. It also job opportunities. These projects build on the successful busi- runs a 100,000 ton The primary reason for the privatization is that ness relationship in EQUATE Petrochemical per annum the sale of gasoline or petrol in stations is not Company between PIC and Union Carbide polypropylene regarded as one of KPC’s main activities. As Corporation, a wholly owned subsidiary of plant through an arrangement with EQUATE. is the case in many other countries, it will Dow. now be undertaken by the private sector. Calciner Coke Plant The national manpower will not be adversely These projects combine Dow’s strong exist- affected by transference to a new company ing asset base, technology position and mar- As part of its quest to offer more opportunities because a strict proportion of Kuwaitis must ket presence with PIC’s commitment to for the private sector to invest in the oil sec- remain employed in supervisory positions. increasing its investment in downstream tor in order to accelerate the economy wheel, Furthermore, this type of project is likely to petrochemical markets. Additionally, they KPC decided to privatise the coke calciner lead to more job opportunities, resulting from demonstrate the commitment of Dow and PIC plant. By this move, KPC has activated a long- increased competition and service quality to better supply growing customer needs for awaited program to open new areas in the such as round the clock opening hours, car these products around the world. vital petroleum industry to the private sector. washing facilities (currently only 4 gas sta- The joint ventures represent PIC’s largest This plant is one of the many petroleum proj- tions offer this service), the efficient sale of oil investment to date outside of Kuwait, and ects that KPC is planning to introduce to the and supermarket services. these further investments with Dow represent private sector. The plant uses crude petrole- Nationals working in the stations at the an important milestone in developing PIC’s um coke from KPC’s Mina Abdullah Port moment will be given the opportunity to move strategy to expand its participation in the Refinery as a primary source during produc- to the new company via contracts that regu- global petrochemical industry. tion. The calciner is a product used mainly for late the transference of ownership. PIC represents the petrochemical arm of KPC the aluminium industry. Moreover, KNPC and the new and produces fertilizer and petrochemicals. Al Mal Kuwaiti Company won the tender and company will operate the sta- PIC has invested in the modernization of its the value of the project is estimated at tions together for an interim fertilizer complex in Kuwait and expects to US$150 million. period of one year.

58 KPC WORLD,JANUARY,MARCH 2005 KPC WORLD,JANURAY,MARCH 2005 59 Submit your releases, articles, news items, ideas for articles, attendances at conferences, symposiums, reports on visiting dignitaries and letters to the Editor-in-Chief of KPC World.

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