News Round Up

OIL DEMAND RISE FASTER THAN EXPECTED

The world oil demand is expected to grow faster than anticipated this year according to the International Energy Agency (IEA). Estimated demand growth this year has been revised up by 290,000 barrels per day (bpd) to 1.81 million bpd, taking the annual global consumption to 84.3 million bpd.

“The revision is attributed primarily to very cold weather in late February and early March, a more robust view of US economic growth and the impact of this and other factors on China’s oil demand growth prospects”, said the IEA which advises the industrialized nations on energy policy.

Rapid demand growth and disappointing supply forecasts have tightened the oil supply outlook this year, helping push oil prices up to near record highs.

The IEA has revised its estimate for 2005 world demand growth up by 500,000 bpd in the last three months, as synchronous growth in the Chinese and US economies prove more resilient than expected to the impact of higher energy costs.

The IEA is now right in the middle of world demand growth forecasts as surveyed by Reuters in February 2005.

“We feel comfortable with where our forecasts are, but considerable uncertainties remain over economic growth in China, where it is just very difficult to make forecasts”, said Lawrence Eagles, Editor of IEA’s monthly report.

The Paris -based agency revised its Chinese oil demand growth up by 100,000 bpd to 500,000 bpd – an annual increase of 7.9 per cent, compared with 15.6 percent last year.

Robust US economic momentum will help sustain China’s manufacturing exports, the IEA said.



OPEC LIFTS CEILING

As oil prices hovered around $ 55a barrel,OPEC took a decision to increase the output during its meeting Iran on 16th March 2005. The decision has surprised many Analysts, who had expected a quota rollover. OPEC has also pledged a further rise if the move failed to calm the market. However, the immediate effect on the prices was limited, with the traders knowing that the production pledge would have no material effect on output. Spot Brent was trading at $54.95 a barrel on 17th March, compared with $54.27 a barrel a week earlier.

The OPEC Ministers opted to raise the output quota by 500,000 barrels a day (b/d) to 27.5 million b/d with immediate effect. But with the OPEC members already producing some 27.7 million b/d, no additional barrels are likely to hit the market. Delegates also bestowed on the Group’s President, Kuwaiti Energy Minister Shaikh Ahmed Fahad Al-Sabah, the authority to increase the ceiling by a further 500,000 bpd ahead of the next meeting in June, if prices maintained current highs.

Saudi Arabia is reported to have been behind the late change of heart – until a few days before the meeting, members had bee expressing fears about weak second quarter demand and hinting at unchanged quotas and even a production cut. Iran, Kuwait and Nigeria were rumored to have pushed for any increase to be postponed until May.

In their closing communiqué, OPEC ministers maintained their position that rising prices were unrelated to any physical shortage of crude – a view widely shared.



KHAFJI LAUNCHES THREE PROJECTS

Khafji Joint Operations (KJO), the Joint Venture between Kuwait Gulf Oil Company (KGOC) and Aramco Gulf Operations (AGOC) of Saudi Arabia, has launched three major projects with a view of maintaining and increasing oil output at its Divided Zone Offshore concession.

International contractors have been invited to submit applications for pre-qualification by 10th April 2005 for a contract to expand the Hout field’s onshore production facilities. It will be a turn-key bid. The tender for this estimated $ 60 to 75 million contract is expected by the middle of the year and an award is expected before the end of the year. The project will include construction of storage tanks TK-7 and 8, Buffer Tank TK-30 and the installation of a reclaiming system in Ratawi .

The two storage tanks will be built alongside existing storage facilities and will be connected by a 20-inch-diameter pipeline to the ship loading facilities. The buffer tank will be installed near an existing desalter unit and will be linked to the existing buffer tank inlet by a new 14-inchdiameter pipeline. The reclamation system involves the installation of two oil and water separation surge tanks in the Ratawi area.

The second project is a 15-month contract to provide maintenance services for crude oil storage tanks TK-121, 123 and ATK-6. The contract also covers the installation of safety protection measures and associated instrumentation systems. The last date for submittal of the bid for this project is 4th April 2005.

Thirdly, contractors have been invited to bid for a contract to carry out works on the KJO onshore crude handling facilities. At least two com panies including Snamprogetti of Italy and Consolidated Contractors International Company (CCC) of Athens are expected to put in their bids. The closing date for submission of bids is 25th April 2005.

KJO is also drawing up a shortlist of contractors for the project’s offshore portion covering an offshore sub-sea pipeline, submarine cables and structural platform modifications. A tender is due to be released shortly. Toyo Engineering Corporation of Japan is the Front-end Engineering and Design contractor.

These projects are part of a $1800 million fiveyear investment program for the Divided Zone with the aim of increasing crude output by 100,000 barrels per day (bpd) to 700,000 bpd.

PETROFAC WINS KOC’s MAINTENANCE PROJECT

Petrofac Facilities Management (PFM), part of Petrofac International of UAE, bagged a five-year performance based maintenance contract, covering Kuwait Oil Company (KOC) facilities in North and West Kuwait. This is the first of its kind to be awarded to an international contractor in the State of Kuwait.

Under the terms of the contract, Petrofac will provide integrated maintenance management and services to improve equipment availability and reduce repair costs. The company will also establish warehouse and workshop facilities to carry out the work. Evaluation of the firm’s performance will be carried out through a fivepoint system.

KNPC has already signed a deal for Project Management Consultancy with Fluor Daniel of the United States, who will provide administrative and consultative services to the new refinery project. They are also expected to provide similar services for upgrading the other existing refineries of Kuwait. Kuwait has one tenth of the global oil reserves and currently has three refineries with a total crude oil processing capacity of 930,000 bpd. Unlike the existing three refineries, the new refinery will be able to handle several types of crude oil.

The new refinery is one of the several projects being developed by Kuwait in the energy sector in the next two decades.

Meanwhile, Kuwait and India have discussed the possibility of Kuwait Petroleum Corporation (KPC) acquiring a stake in one of the two proposed refineries in India.

KPC is interested in the proposed 15 million tones per year Paradip Refinery to be built in the eastern state of Orissa in India by the Indian Oil Company (IOC) and in the proposed 6 million metric tones per year Bina Refinery.


KPI SIGNS MoUs FOR OVERSEAS OPPORTUNITIES

Kuwait Petroleum International (KPI) , the marketing division of Kuwait Petroleum Corporation (KPC) has signed two Memoranda of Understanding with the Royal Dutch / Shell Group and BP to explore downstream investment opportunities abroad.

As per the agreement reached with BP, the two companies will seek investment opportunities jointly in China, co-operating in the supply, distribution and marketing of refined products to Beijing and other Far Eastern countries. Oil demand in China has grown by 1.6 million barrels a day over the past two years alone, 90 percent of which is met by crude imports.

A similar agreement with Shell has been signed, according to which, both KPI and Shell will exploit downstream operations around the world, concentrating on markets which have strong downstream fundamentals and high growth for refined products.

BIDS UNDER EVALUATION FOR OLEFINS II PROJECT

Two international contractors namely Technip of France and SK Engineering of Korea have submitted their bids for the construction of the 850,000-tonn-a-year Ethane Cracker on the Olefins II project, which is the first package on the estimated $1500 million petrochemical complex. The bids are being evaluated by the Project Management Consultants, Fluor Corporation. The award is expected by end of June 2005.

These were the only two companies pre-qualified for the estim ated $550 million Engineering, Procurement & Construction (EPC) contract. The duration of the project is expected to be 30 months.

contd. 

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