OPEC FORECASTS QUIET MARKET
Oil prices fell in the third week of May as US stocks rose and the bearish aspects of OPEC’s latest monthly report made the headlines. However, threat emerged with Saudi Arabia warning that its ability to lower the prices was limited due to a forecast decline in non-OPEC supply in the second half of the year. Spot Brent was trading at $47.32 a barrel on 18th May 2005.
The statistics widely publicized from the OPEC study was the downward revision of the prediction for 2005 demand growth, by 70,000 barrels a day (b/d) to 1.82 million b/d – but the producer group also said that they expected the call on their own crude to rise in the third and fourth quarters, as non-OPEC supply growth falls by 190,000 b/d to 800,000 b/d.
Debate as to the cause of the painfully high oil prices as intensified in the recent weeks and the Saudi Petroleum and Mineral Resources Minister pointed to the inflexible US products market as the prime culprit.
US inventories rose once again in the week to 13th May. Crude stocks climbed by 1.3percent to 334 million barrels, up 11.3 percent, while gasoline supplies built by 0.5percent to 214.8 million barrels, 5.6 percent up year on year.
IMF PRAISES KUWAIT’S ECONOMIC GROWTH
The latest IMF Article IV consultation, released on 13th May 2005 is in all praises for Kuwait’s economic performance over the past 12 months. The report says that the real Gross domestic Product (GDP) grew by 8.5 % in both 2003 and 2004, the highest growth rate over the last 15 years. Per-capita income grew by 34.5 % over the two year period, while inflation and unemployment remained low as less than 2 per cent and 3.5% respectively in 2004.
Broad money growth accelerated to 7.8 percent in 2003 in line with rising demand and an increase in the availability of private sector credit. The current account surplus remains health, more than doubling over the two-year period to 29 percent of GDP in 2004. Exports grew at an annual rate of 33.6 percent due to a surge in oil and non-oil exports, the latter supported by a sharp increase in export and re-export activity to Iraq.
The report stated that the fastest pace of economic expansion since the 1990-91 Gulf War combined with oil-related terms-of-trade gains, has boosted per capital income and helped build up assets for future generations at a record pace.
However, the IMF also commented on Kuwait’s ongoing employment problem, stating that generating employment opportunities for the fast-growing Kuwaiti labor force in the domestic private sector and diversifying the structure of the are the major medium-term challenges for Kuwait.
The IMF encouraged the Government to speed up the pace of reform by opening up the economy to private sector investment and urged it to expedite the passage of the privatization and tax laws.
It also warned about the increasing size of the public sector and encouraged the government to secure the independence of the capital market and Central Bank of Kuwait supervisory authorities.
KPC WANTS IOC’S STAKE IN FOURTH REFINERY
Kuwait National Petroleum Company (KNPC), the refining arm of Kuwait Petroleum Corporation (KPC) is holding discussions with major companies in Asia and West in connection with offering the international oil companies a 20% stake in the planned Fourth Refinery, according to Mr. Hani Hussein, Deputy Chairman of KPC. He has also announced that more than $55,000 million will be spent in doubling the oil production capacity of the State of Kuwait to 4 million barrels a day (b/d) in the next 15 years, by boosting gas supplies and developing downstream industries.
The decision to bring in foreign companies is a deviation from the policies pursued hitherto by the refining sector, which is wholly controlled by KNPC. According to Mr. Hani Hussein, KNPC is looking for a strategic partner who can add value to the project and an agreement to this effect will be finalized not later than six months or one year. The location for the proposed $5,000 Million new refinery is being finalized by KNPC. The refinery is expected to be commissioned by May 2010. KPC has long term plans to increase the oil production to more than 4 million b/d by 2020. This is estimated to cost $55,000 million and KPC expects to implement these plans with the assistance of international companies in the downstream, petrochemical and service industries. The Parliament of Kuwait is expected to vote on the “Project Kuwait”, which involves increasing production from the four northern fields by 450,000 b/d to 900,000 b/d, by the end of June 2005.
A deal will be struck with one of the neighboring countries of Kuwait for long term gas supply. Discussions were held recently with Iran in this regard. Agreements were also signed with Qatar and Iraq for gas imports, but security and political problems have stalled these deals.
KPC is also set to expand its overseas presence and have recently signed Memoranda of Understanding (MoUs) with BP of United Kingdom and Royal Dutch/Shell Group to study the marking opportunities in China.
KUWAIT TO GO AHEAD WITH METRO RAIL PROJECT
The Government of Kuwait has announced that it was planning to build a metro system covering Kuwait City in an attempt to alleviate growing traffic congestion.
A consultant would be appointed soon to carry out a fully feasibility study into the project, which will be implemented in three phases.
The planned $1,725 million first phase will involve the construction of a U-shaped line running from Salwa through the center of Kuwait City to Ardiya. The Ministry of Public Works is looking at a combination of underground and elevated sections. It is still not decided whether the project will be undertaken on a Build-Operate-Transfer (BOT) basis or conventionally financed.
Parsons Brinkckerhoff of USA has completed a pre-feasibility study for the project.
It is also understood that the Government of Kuwait is considering the formation of a new Railway Authority to oversee the metro and the Kuwaiti section of the proposed GCC Rail Network.
KJO TO BUILD WELHEAD PLATFORM
Khafji Joint Operations (KJO) has floated a pre-qualification for qualifying international companies for a detailed engineering, procurement, construction, installation and commissioning (EPCIC) contract covering the construction of a new offshore wellhead platform in the Divided Zone. The $100-150 Million project is expected to be awarded in September 2005 and the duration of the project is scheduled for 15months.
The lump sum turnkey project involves the construction of the 1000-tonne wellhead platform of about 40 km offshore, in a water depth of 30 meters. The facility will consist of a two-deck structure with an associated heli-deck.
The project is the latest in a series of contracts tendered by KJO.
The contract is part of a $1800 million, five-year investment program for the Divided Zone with the aim of increasing crude output by 100,000barrels a day (b/d) to 700,000 b/d. Toyo Engineering Corporation of Japan are the contractor for front-end engineering and design.
KJO is a 50:50 Joint Venture between Kuwait Gulf Oil Company (KGOC) and Saudi Arabia’s Aramco Gulf Operations (AGOC).
“GATE OF KUWAIT” BEING TENDERED
Tender documents are under preparation for the construction package of a major mixed-use tower development on the Al-sour Street. The tower named as “Gate of Kuwait” with an estimated cost of $172 million, is expected to be one of the tallest inhabited structures in the State with a height of up to 270 meters.
The client, AL-SHAYA GROUP, will be awarding the main construction contract by September 2005. Local contractors are expected to form Joint Ventures with international contractors for bidding for the project. The construction duration is expected to be two years.
The development, which is located at one of the gates to the Kuwait city’s old wall, will have a built-up area of 127,000 square meters. It will include a car park with for about 1,600 vehicles, a five-star luxury hotel, offices, a conference center and 5,000 square meters of retail space.
The scheme has been jointly designed by GLH Partnership of South Africa and KEO International Consultants, Kuwait.
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