(MENAFN- Arab Times) Independent Oil Analyst Do we need to build more refineries inside or outside Kuwait or should we just keep on selling oil in its raw form as crude oil? Currently Kuwait Petroleum Corporation owns and operates five refineries three in Kuwait and two in Europe. It is currently building the sixth refinery in Vietnam with total refining capacity of over 1.3 million barrels. The current debate in Kuwaiti oil industry is regarding whether we need to invest more in building refineries overseas or continue selling our crude oil directly without incurring additional huge costs with uncertain financial returns in the end.
It is also not known if the crude oil supply is going to last long and whether its outlets will become smaller and more competitive if the safety of the Kuwaiti crude oil is not secured. Negotiated Long-term contracts do not mean much as long as prices are being negotiated on a monthly basis and we must compete with other suppliers especially since there is no obligation to continue buying if we are unable to meet others' terms and conditions including the price and payment terms. This is the nature of the crude oil supply agreements despite the availability of the oil in the market; even few US dollars can break a contract deal. On the other hand building refineries in oil-consuming countries through joint ventures with the host countries will definitely secure safety for the Kuwaiti crude oil for a long time. In addition the host company will participate and share the cost of building the refinery by at least 50 percent. Such long term security is one among the several benefits in investing in an oil-consuming country. However the disadvantage is that such projects will not create job opportunities for Kuwaitis; but there are other hidden benefits of being involved with other domestic projects. Kuwait's experience in its joint venture in Europe particularly in Italy is a good example of a profit- making operation which has resulted in vast benefits for the Kuwaiti oil industry. Kuwait Petroleum Corporation has the advantage of obtaining the best revenues for its crude oil trade. For an oil-producing country to invest in refinery locally or in an oil-consuming country is never a case of losses. It will always have the benefit of added value compared to selling just crude oil. It creates job opportunities in that country and increases its customer portfolios. Instead of depending just on a few crude oil customers investments of such kind will triple the number of customers globally. This is an added advantage that is ignored all the time by those who support the selling of crude oil. Kuwait today has limited opportunities to invest and build new refineries overseas particularly in Asia as the countries are limited and require hard work from people the industry as well as the government. Our only hope is India and Indonesia. However other Gulf oil-producing countries are also eyeing the same perhaps with more incentives and closer political ties. Nevertheless Nevertheless Kuwait can always claim that it was the 'pioneer' in this field and its experience speaks for itself. This debate is bound to go on and on in Kuwait. Our hands are full as we have two mega refineries and one underway in Vietnam. However building refineries in China or Indonesia will be a golden opportunity for the Kuwaiti oil industry; with this the debate will be stopped forever.
email: By Kamel Al-Harami By: Kamel Al-Harami
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