Hatem Al-Awadhi: New Oil Bahrain · Hatem Al-Awadhi: 615,000 bpd of refining capacity places Al-Zour refinery on int’l track. 7 Issue 52 the project is aimed to achieve self-sufficiency

OAPEC Energy Ministers approve budget, tackle reports of Arab Energy Confab

Vietnamese Ambassador: We seek strategic

partnership with Kuwait

Hatem Al-Awadhi: Al-Zour Refinery is

int’l project

Bahrain joins oil world through «Mountain of Smoke»

Gulf Petrochemical Industry

Hydropower isinexhaustible energy

New Oil Minister…

hopes & ambitions

Quarterly Magazine - Published by Ministry of Oil - The State of Kuwait February - 2019 - Issue 52

Vietnam

Refinery and P

etrochemical C

omplex inaugurated experim

entally on Decem

ber 23, 2018.

Edi

tori

alEditorial

EditorialUnder the wise leadership of HH the

Amir Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah, HH Crown Prince Sheikh Nawaf Al-Ahmad Al-Sabah, HH Prime Minister Sheikh Jaber Mubarak Al-Hamad Al-Sabah, the locomotive of sustainable and inclusive development has moved forward to accomplish a new achievement registered in the list of achievements fulfilled by the Kuwaiti oil sector. This development locomotive reflects the deep understanding of the Kuwaiti oil sector’s personnel to the nature of the rapid internal and external changes taking place in the oil industry; in addition, it reflects their abilities to implement the sector’s 2040 strategy which is aimed to underpin the status of the State of Kuwait internationally in such substantial industry particularly the refining and petrochemical industry.

Indisputably, the step of inaugurating Vietnam Refinery – Nghi Son Petrochemical Refinery Complex – recently in 2018 in Nghi Son economic region near the Vietnamese capital Hanoi will help effectively achieve several economic and non-economic acquisitions on top of which the safe outlet through which the Kuwaiti oil will be sold on the long run through refining about 200,000 bpd. Add to that the products which will be produced by the refinery such as the liquefied

petroleum gas, high-octane petrol, diesel, jet fuel, sulfur, paraxylene, and polypropylene.

These products will be sold in the local Vietnamese market; whereas the petrochemical products will be sold to Japan’s Idemitsu Kosan Co., Ltd, Kuwait’s Petrochemical Industries Company (PIC) and other international clients. As for the non-economic benefits, this gigantic project will take part sturdily in reinforcing relations with the foreign partners; the matter helps exchange experiences and skills with the Kuwaiti employees who work in the project.

In fact, Vietnam refinery project, Clean Fuel Project (CFP) and Al-Zour refinery project reflect the tremendous efforts exerted by the Kuwaiti oil sector to achieve a specific leap for the State of Kuwait in oil industry internationally to meet the forward-looking hopes of the Kuwaiti nationals and the coming generations.

In this context, I’d like to send cables of congratulations to His Excellency the new Minister of Oil, Minister of Electricity and Water Dr. Khalid Al-Fadhel on the trust which the higher political leadership has put in him hoping to fulfill more achievements for the Kuwaiti oil sector.

Sheikh Talal Nasser Al-Azbi Al-SabahActing Undersecretary - Ministry of Oil

INDE

X

@moo_kw

moo_kw

Quarterly Magazine Published by Ministry of Oil, The State of Kuwait Issue 52 – February 2019

Editorial Staff

Sheikha Tumadhir Khalid Al-Ahmad Al-Sabah

Mrs. Hafsa Mosaed Khalifouh

Mrs. Mariem Nasser Behbehani

Mrs. Nourah Abdulaziz Al-Hawlan

Mr. Nasser Khalid Al-Rujaib

Opinions and articles published in the magazine reflect the opinion of their writers not the magazine’s viewpoint.

Correspondences to:

Petroleum Media and Public Relations Department

P.O. Box: 5077 Safat Code: 13051Telephone: 24995155 Fax: 24995154

Email: [email protected]

Kuwait’s Oil Sector receives welcomingly new minister with hope,optimism

Hatem Al-Awadhi: 615,000 bpd of refining capacity places Al-Zour refinery on int’l track

OAPEC Council of Ministers approves budget, reviews reports of 11th Arab Energy Confab

4

Minister of Oil

Interview

File of the Issue

6

10

Trinh Manh: It is important to have strategic partnership between Vietnam, Kuwait in oil & gas

By/ Sheikha TamadherKhalid Al-Ahmad Al-Sabah

Kingdom of Bahrainenters oil world through ‘Mountainof Smoke’ oilfield

Features & Directions of GCCPetrochemical Industries

Strategic Projects

Article

Spotlight

Study

Renewable Energy

Hydroelectricityis inexhaustible energy20

34

26

40

33

4Issue 52

Special File for OAPEC Gold

JubileeMinister of Oil

His Excellency Dr. Khalid Ali Al-Fadhel, Minister of Oil, Minister of Electricity and WaterPlace of Birth: The State of KuwaitAcademic Qualifications:• Master and Doctorate degrees in

Chemical Engineering from Lehigh University, USA

• Bachelor of Chemical Engineering, College of Engineering and Petroleum at Kuwait University

Experiences:• Member of Teaching Staff of Chemical

Engineering Department – Kuwait University

• Director of Guidance Office – Kuwait University

• Vice Dean of Students’ Affairs – College of Engineering and Petroleum at Kuwait University

• Undersecretary of Ministry of Commerce and Industry in 2018

• Minister of Oil, Minister of Electricity and Water and Chairman of KPC’s board of directors in 2018

Kuwait’s Oil Sector receives welcominglynew minister with hope, optimism

The Kuwaiti oil sector represented by Ministry of Oil, Kuwait Petroleum Corporation (KPC) and its subsidiaries received welcomingly His Excellency Minister of Oil, Minister of Electricity and Water Dr. Khalid Al-Fadhel to congratulate him on the trust that HH the Amir Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah, HH Crown Prince Sheikh Nawaf Al-Ahmad Al-Sabah and HH Prime Minister Sheikh Jaber Mubarak Al-Hamad Al-Sabah have put in him.

Al-Fadhel was received by a large number of top officials from the oil sector on top of them Eng. Hashim Hashim, Chief Executive Officers of KPC, CEOs of oil companies, employees, public personalities and media practitioners.

The congratulators wished more success for HE Dr. Al-Fadhel in his new mission particularly under the new changes taking place in the oil sector, as these changes are based on efficiency and experience.

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6Issue 52

Refining industry is considered one of the most variable and changeable industries all over the world, as it is dynamically complicated and developed industry incessantly starting from the process of producing fuel and energy till the phase of producing oil distillates and fulfilling integration with petrochemical industry.

The State of Kuwait represented by Kuwait Petroleum Corporation (KPC) has earlier realized the incessant concern paid by the entire world for the petrochemical industries through the new legislations and laws which are issued to protect the environment. Consequently, the State of Kuwait thought of the importance and necessity of establishing a new refinery to underpin its status in refining industry internationally. To throw more light on Al-Zour refinery project, Alnaft Newsletter interviewed Mr. Hatem Al-Awadhi, Acting Chief Executive Officer of Kuwait Integrated Petroleum Industries Company (KIPIC), who answered the following questions copiously:

• With the advent of achieving and operating Al-Zour Refinery, could you spotlight the importance of such project for the Kuwaiti oil industry?Al-Zour refinery is a project carried out in line with

KPC strategic directions in refining field and local manufacturing. These directions are aimed to expand the refining capacity to reach about 1.4 million barrels per day of crude oil on the middle term. The project is also in liaison with the policies and objectives of the annual development plan which is aimed to expand the refining capacity of the crude oil locally; besides coping with the changes taking place in the

international oil markets, and the needs of the local market to accomplish an added value for the national income. • Could you clarify how Al-Zour refinery project

will add a new value for the natural resources and augment Kuwait’s share internationally? Al-Zour refinery project is considered one of the

gigantic international projects in refining sector, as it is designed with refining capacity estimated at 615,000 bpd which is equal to 46% of the total refining capacity of the State of Kuwait; the matter will take part effectively in increasing such capacity gradually from 936,000 to 1.4 million bpd. Basically,


JubileeInterview

Hatem Al-Awadhi: 615,000 bpd of refining capacity places Al-Zour

refinery on int’l track

7Issue 52

the project is aimed to achieve self-sufficiency from the production of friendly environmentally fuel whose sulfur content is about 1% to meet the need of fuel to produce power. Accordingly, the design of Al-Zour refinery has been allotted to produce a friendly environmentally fuel with productivity estimated at 225,000 bpd; besides producing about 340,000 of refined oil products with low sulfur content in liaison with the future international export specifications to meet the needs of the international markets. • Are there other objectives to be fulfilled by Al-

Zour Refinery?•Infact,severalgoalswillbeaccomplishedthrough

Al-Zour refinery project. These goals can be summed up in the following points:

• Refining the heavy oil which will be allegedlyproduced in the future.

• Providing new job vacancies for the Kuwaitipersonnel.

•Enablingtheprivatesectortotakepartinsupportingactivities during and after implementing the project.

•Hugeprojectsconfrontseveralchallenges,whatarethe main challenges KIPIC confronts?

The main challenges which KIPIC confronts can be briefed in the following points:

• Achieving integration between Al-Zour Refineryproject and the utilities of importing LNG and Petrochemical Complex project.

•Keepingthecompany’songoingprojectswithhighquality.

•Preparingtherefinerytobeoperatedasitisplanned.• Completing the agreements of pricing the crude

oil, products and main services to crystallize the appropriate financial model for the company to support its financial tendency and improve the level of performance.

•Recruitingnationalpersonneltofillthecompany’sjob vacancies.

•Identifyingtheappropriatepartnerstobeoperatorsfor the support units; besides the contractors of technical support to launch the operation and maintenance activities. Identifying also the strategic partners for the company’s projects to achieve an added value and improve efficiency.

•Allottingastrategicframeforthecompany’shugeprojects and activities on the long run through defining the systems of governance and models of oil companies’ businesses as well as the future investment opportunities.

• To what extent does KIPIC coordinate with KNPC?KIPIC has signed several cooperation protocols

with KPC and its subsidiaries particularly Kuwait National Petroleum Company (KNPC) to provide the support and logistic services for the company; besides forming teams to implement KPC strategic directions regarding the refining and manufacturing sector. In fact, I would like here to extend appreciation for the diligent efforts exerted by KPC and its subsidiaries for their unlimited support for KIPIC.

KIPIC inks several cooperation protocols with

KPC, subsidiaries to providelogistic services

Eng. Hatem Al-Awadhi talking to Mariem Behbehani.

8Issue 52


JubileeInterview

• How could KIPIC meet the increasing needs of the State of Kuwait from LNG?In fact, KIPIC keeps an eye on the increasing needs

of the local market from natural gas; therefore, it is carrying out the project of LNG import utilities to meet these increasing needs to generate electricity; besides meeting the needs of other consumers such as refineries and petrochemical industries. We dare say that this project is considered the first of its kind in the State of Kuwait, as its capacity is estimated to 3000 Billion British Thermal unit (BTU) which is equal to 65,000 tons per day approximately. This project will play an essential role in the short run, as it will

provide a friendly environmentally fuel produced by Al-Zour refinery to meet the needs of power stations; the matter will help save additional quantities of crude oil and gasoil to sell them in various markets in a step aimed to optimize the Kuwaiti oil resource.• What are the main products produced by Al-

Zour petrochemical complex? To what extent does the int’l market need them?Indisputably, Al-Zour refinery and petrochemical

complex will produce a number of important products which are highly required by the oil market among which naphtha, jet fuel which is also known as Aviation Turbine Kerosene (ATK), diesel and fuel oil

9Issue 52

with low content of sulfur, paraxylene, polypropylene, petrol and motor gasoline.

As for the issue of marketing KIPIC products and the targeted markets, let me tell you that the company is incessantly coordinating with KPC to allot elaborate plans and strategies to market such products inside and outside the State of Kuwait to achieve the highest possible economic return from the company’s operations. • Could you highlight the role played by the private

sector in the capitalistic projects of the Kuwaiti oil sector?KPC is keen on supporting the private sector

through providing appropriate opportunities through which the private sector can take part in implementing the development projects in the country. Moreover, KIPIC has tackled the possibility of the private sector’s participation in some operation and maintenance activities of some of its utilities. Furthermore, it has tackled in coordination with KPC the chances of privatizing some other fields to enable the private sector and the foreign partner to take part in implementing them in order to allot a comprehensive vision for the best options of privatization to guarantee the success of the company’s projects.

KIPIC coordinates with KPC to boost the private sector’s participation in its

operations and maintenance

activities

225,000 bpd

of friendly

environmentally fuel

to be produced by Al-

Zour refinery

10Issue 52


JubileeFile of the Issue

In his inaugural speech in the meeting, Al-Mazroui thanked and extended appreciation to HH the Amir of the State of Kuwait Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah, the Kuwaiti government and the nation for the generous hospitality, hailing the endless support provided by the State of Kuwait, which is OAPEC headquarters, to the activities of the organization. He also extended appreciation to all officials and representatives, on top of them OAPEC secretary-general, for their keenness on attending the meeting, confirming that the ultimate objective of OAPEC is to underpin

cooperation among the member countries in all activities concerning the petroleum industry to serve the interests of their nations. He added that the multiple topics tackled on the agenda of the meeting are aimed to sustain the organization’s activities and help it accomplish its goals and interests of its members. Therefore, it spares no effort to move forward to achieve these targets. This has been epitomized in the diligent efforts put forth during the financial year 2017/2018, as it has geared up several economic and technical studies to serve such purposes; besides

The State of Kuwait hosted the activities of the 101st meeting of OAPEC’s Council of Ministers which were convened in the presence of HE Secretary-General of OAPEC Mr. Abbas Ali Al-Al-Naqi on December 23, 2018. The meeting was headed by HE Eng. Suhail bin Mohammed Al-Mazroui, the United Arab Emirates’ Minister of Energy and Industry, whose country held the rotatory presidency of the organization in 2018.

101st meeting of OAPEC’s Council of Ministers held in Kuwait

OAPEC Council of Ministers approves budget, reviews reports of 11th Arab Energy Confab

11Issue 52

bolstering coordination among all members.For his part, HE Secretary-general of OAPEC

Abbas Al-Naqi welcomed the ministers and delegations that took part in the meeting on top of them HE Deputy Premier for Energy Affairs, Minister of Oil of Iraq Thamir Abbas Al-Ghadban, and HE State Minister for Energy Affairs and Petroleum of the State of Qatar, Managing Director and Chief Executive Officer of Qatar Petroleum Saad Al-Ka’abi, who participate in the meetings of OAPEC’s Council of Ministers for the first time.

Al-Naqi submitted the agenda of the 101st meeting which included a number of issues displaying the achievements fulfilled in 2018; besides the organization’s budget of 2019.

The meeting tackled and approved its agenda; besides other issues listed on the

12Issue 52



agenda among which the minute of the 100th meeting which was held on the level of the representatives on April 30, 2018 in the State of Kuwait; besides approving OAPEC’s estimated draft budget for 2019. In addition to

re-recruiting Al-Bassam Office as an auditor for the organization’s accounts for 2019 and tackling the report of OAPEC’s Secretariat-general regarding the international petroleum positions.

13Issue 52

OAPEC subsidiaries boost successfully their oil

investments

The council tackled also the report of the secretariat-general regarding the activities of the 11th Arab Energy Conference which was convened in Marrakesh, the Kingdom of Morocco between 1-4 October, 2018. In addition, it tackled the reports geared up on the studies which the secretariat-general accomplished in 2018 after concluding eight technical and economic studies regarding oil and energy.

It highlighted also other issues such as the environmental changes and climate change phenomenon on top of which the outputs of the conference of UN Framework Convention on Climate Change (COP-24) which was

held in Katowice City, Poland between 3-14 December, 2018; besides following up the progress of Information Bank and its activities; as well as other 14 activities organized during the second half of 2018 in participation of OAPEC’s Secretariat-general.

It further tackled the annual report which highlighted the activities of the organization’s Arab subsidiaries particularly during the period between 2017 and the first half of 2018. In addition to that, it was informed of the results of the 47th annual coordinative meeting of these subsidiaries which was held in Marrakesh, the Kingdom of Morocco on October 4, 2018.

14Issue 52



The council approved during its 101st meeting the decision of expanding the supervision period of Iraq over Arab Oil Training Institute for one more year starting January 1, 2019; in addition, the Kingdom of Bahrain will head the coming round of OAPEC Council of Ministers and Executive Office for one year starting January 1, 2019.

At the end of the meeting, Al-Mazroui dispatched cables of gratitude and appreciation, on behalf all ministers and representatives, to HH the Amir of the State of Kuwait Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah for hospitality and generosity.

The conferees agreed at convening the coming

meeting of OAPEC Council of Ministers in the State of Kuwait on December 22, 2019. After that, a press release was distributed to conferees including the following items:• Approving the minute of the 101st meeting

15Issue 52

which was held on the level of representatives in the State of Kuwait on April 30, 2018.

• Approving OAPEC’s estimated budget for 2019.

• Re-appointing Al-Bassam Office as an auditor for OAPEC’s accounts for 2019.

• Reviewing the secretariat-general’s report regarding the international petroleum positions.

• Reviewing the secretariat-general’s report regarding the incidents and outputs of the 11th Arab Energy Conference which was held in Marrakesh, the Kingdom of Morocco between 1-4 October, 2018.

• Reviewing the reports of the secretariat-general’s activities in the following fields:

• The eight technical and economic studies conducted by the secretariat-general during 2018 regarding oil and energy.

• Following up the environment affairs and climate change phenomenon particularly what have been issued during the conference of UN Framework Convention on Climate Change (COP-24) which was held in Katowice City, Poland between 3-14

December, 2018.• Following up the progress and development

of Information Bank.• Following up the fourteen activities

organized during the second half of 2018 in participation of the secretariat-general.

• The conferees tackled also the annual report which spotlighted the activities of OAPEC’s Arab subsidiaries during 2017 and the first half of 2018. They have been informed of the results of the 47th annual coordinative meeting of these subsidiaries which was held in Marrakesh, the Kingdom of Morocco on October 4, 2018. That meeting stressed the

8 technical, economic studies regarding oil and

energy fulfilled by OAPEC secretariat-general in 2018

16Issue 52



importance of bolstering coordination and cooperation among all subsidiaries in their related fields.

• Furthermore, the conferees agreed at thefollowing:

• Expanding the supervision period of Iraqover Arab Oil Training Institute for one more year starting January 1, 2019.

•Delivering thechairmanshipof thecominground of Ministers’ Council and Executive Officer to the Kingdom of Bahrain starting January 1, 2019.

• Dispatching cables of gratitude andappreciation to HH the Amir of the State of Kuwait Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah for hospitality and generosity.

•Agreeingatconvening thecomingmeetingof OAPEC Council of Ministers in the State of Kuwait on December 22, 2019.

•Afterconcluding theactivitiesof the101stministerial meeting, Al-Mazroui indicated in a press conference that the percentage of curtailing oil production of OPEC member countries will reach 3%; whereas this

percentage will be 2% from the non-OPEC members; in addition, this cut will come into effect starting January, 2019 for six months in liaison with the agreement approved by the organization and the big oil producers.

•EmphasizingthatLibya,IranandVenezuelaare exempted from the agreement of curtailing oil production, Al-Mazroui clarified that the level of production in October, 2018 will be the reference of reducing production for most OPEC members and independent producers who agreed at reducing supplies.

•HefurtherpointedoutthatOPECandnon-OPEC member countries are keen on re-stabilizing and re-balancing the market as it was in the summer of 2018, adding the producers of shale oil will be firstly harmed by the decline of prices coincidently with the slowness of shale oil production.

Outputs of COP-24 confab top the agenda of Council of

Ministers

17Issue 52

On the sideline of the 101st meeting of OAPEC’s Ministerial meeting, Alnaf Newsletter interviewed a number of ministers to spotlight their viewpoints over some issues tackled during the meeting. The first interview was with HE Eng. Tariq Al-Mulla, Egypt’s Minister of Petroleum, who said that OAPEC meetings are deemed a considerable opportunity for bolstering coordination among the member sisterly countries; besides reinforcing the bilateral relations among the exporting countries. He added these conferences and meetings help effectively tackle the new developments taking place on the level of the petroleum industry; besides surmounting and easing any obstacles which may impede achieving the organization’s projects. They also help reinforce the commercial relations and the Arab member countries.

With reference to the bilateral relations between Egypt and the State of Kuwait, Al-Mulla confirmed that the two countries have incessant coordination regarding the petroleum projects among which the contract of importing the Kuwaiti crude oil, indicating this contract came into effect since 2004 and it is renewed every three years.

He indicated that Egyptian General Petroleum Corporation (EGPC) signed a contract with Kuwait Petroleum Corporation (KPC) since 2010 to import the Kuwaiti diesel and gasoline, adding it is also renewed every three years.

He further added that EGPC is keen on bolstering cooperation with the Kuwaiti private sector as well. This cooperation is epitomized in the partnership with Kuwait Energy Co. which works in Egypt in drilling and exploration field for many years. He went on to say that the illustrious relations with the Kuwaiti counterpart is embodied in other joint ventures outside Egypt

and the State of Kuwait, as the two sides got a concession in Iraq in Zone 9 south Basra to drill for oil; besides getting another concession in Al-Faiha oilfield which produces gas.

Al-Mulla added that Egypt is keen on underpinning cooperation with its Arab sisterly countries through a number of Egyptian oil companies among which Engineering for the Petroleum & Process Industries (ENPPI) and Petrojet Co, indicating that the Arab countries are also keen on participating in the Egyptian oil industry through entering partnerships in several petroleum and petrochemical projects.

Al-Mulla:Egypt has illustrious partnership

with Kuwaiti private sector

18Issue 52



Alnaft Newsletter interviewed His Excellency Sheikh Mohammed bin Khalifa Al Khalifa, Minister of Oil in the Kingdom of Bahrain, who threw more light on the new projects which are aimed to underpin the Arab joint business, indicating that OAPEC seeks incessantly to bolster cooperation among Arab countries through a large number of companies work in oil and gas industry in most of Arab countries, indicating the conference held under the patronage of OAPEC is basically aimed to reinforce joint cooperation among the Arab countries.

“When we talk about the Kingdom of Bahrain, we cannot disregard the tremendous efforts put forth by Arab Petroleum Investments Corporation (APICORP) which undertakes several oil projects in the kingdom; besides Bahrain Petroleum Company (BAPCO) which possesses a number of direct investment projects,” added Al Khalifa.

He emphasized that the State of Kuwait stands behind that ostensible success accomplished by OAPEC subsidiaries which spare no effort to reinforce Arab joint cooperation in oilfield supported by the top political leadership epitomized in His Highness the Amir Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah.

With reference to the issue of the alternative energy projects and the gradual conversion, he clarified that the step of converting to the alternative energy is not the ultimate goal, as the cabinet is aimed basically to underpin the energy sector; therefore consultations and discussions

are held to tackle the projects of energy and the renewable energy as part of the important energy projects for the future particularly under the global continuous dependence on fossil fuel which is indispensable so far.

Al Khalifa finally extended appreciation to HE the Emirati Minister of Oil Eng. Al-Mazroui, Head of the rotatory presidency of the organization in 2018, HE OAPEC Secretary-general Abbas Al-Naqi, and all ministers and representatives for the achievements fulfilled in 2018.

Sheikh Mohammed bin Khalifa Al Khalifa: The region seeks Arab integration through several

companies investing in oil, gas

Al Khalifa: The State of Kuwait is key reason of

success fulfilled ostensibly by OAPEC subsidiaries in Arab

joint oil business

19Issue 52

Suhail Al-Mazroui:Absolute conformity in vision between OAPEC, OPEC

In the same context, Alnaft Newsletter interviewed HE Emirati Minister of Oil Eng. Suhail bin Mohammed Al-Mazroui to spotlight the outlooks of OAPEC ministers of oil regarding the future scenarios of oil prices.

He clarified that the outlook over the future of the oil market is almost similar, as what was posed by OAPEC secretariat-general is the same as the outlook of OPEC itself because most OAPEC members are already members in OPEC as well; therefore, there is conformity among the exporting countries regarding their future vision on the supply and demand.

“I would like here to underline a very important point embodied in the absolute transparency which has become a basis of treatment with OPEC particularly what is related to its reports geared up and published on the oil market and submitted to OAPEC,” said Al-Mazroui.

As for the diligent efforts exerted by OAPEC to convert gradually to the alternative and renewable energy, he clarified that most OAPEC members have plans to adapt with the new developments taking place in energy field particularly electrical power, as a large number of OAPEC members have allotted strategies to gradually convert to the renewable energy. He confirmed that the United Arab Emirates has its 2050 strategy

which is aimed to save 44% of electricity which will be generated by solar energy, adding Algeria has also ambitious plans in this domain; in addition, it has already initiated the implementation of some projects of the renewable energy. Furthermore, the Kingdom of Saudi Arabia is implementing one of the biggest projects worldwide in the renewable energy, as it is aimed to produce 200 gigawatts. Also, Iraq has renewable energy projects.

He further indicated that the file of the renewable energy should be handed to ministers of electricity in OAPEC member countries, as the organization can provide its members with its accumulated experiences in such substantial field, stressing OAPEC members exert tremendous efforts in this domain.

20Issue 52


JubileeRenewable Energy

Hydroelectricityis inexhaustible energy


21Issue 52

Hydroelectricity is the term referring to electricity generated by hydropower; the production of electrical power through the use of the gravitational force of falling or flowing water. It is inexhaustible energy, as the energy produced from the moving water is used to get electricity; that is how the term ‘hydroelectricity’ is derived.

Man realized earlier the importance of water and its ability to generate electricity; therefore, he sought to harness it to meet his needs from energy. He thought of converting the energy generated from the flowing water into a dynamic energy through designing special wheels allocated in water to utilize its flow to move irrigation machines, grinding wheat, and textile industry…etc.

The idea of using water for the first time was attributed to the Greek farmers and then the Romans. After that, the idea moved to China and the countries of the Far East. Later on, the usage of water power reached its climax in the 1930s after building canals for vertical transport. After that, hydroelectricity became an important resource of generating electricity in the late of the nineteenth century.

The first hydropower station was built in Niagara Falls in 1879. After about three years exactly in 1881, the streets’ lamps of the city of Niagara Falls were lit by hydroelectricity. Later on, the first hydropower station in the world was built and operated in Appleton, Wisconsin, USA in 1882. In the early beginning of the twentieth century, the importance of water energy increased ostensibly until it has topped the list of the renewable energy resources particularly after relying on it to generate one fifth of electricity all over the world.



22Issue 52


Jubilee

Hydroelectricity is considered one of the most important resources which provide huge quantities of electricity for millions of people in the southern part of the desert particularly in Africa. Moreover, water energy can be a significant resource of providing electricity for nearly 2.4 million people in the various poor countries in 2025.

Despite the considerable opportunities provided by such energy, there are several complicated challenges resulted from this energy. This depends on the type of the project on which it is built, its site and amount. However, good management for the projects of water energy improves managing the water resources locally; the matter helps reinforce water security; besides providing irrigation services and controlling floods. This helps reduce and adapt with the impacts of climate change phenomenon.

The way of generating hydroelectricityThe way of generating electricity from

water depends on the ability of converting the energy of the potential position of water into dynamic energy, as water flows from a high level to run turbines which run in turn electrical generators to produce electricity. The amount of produced energy depends on the amount of water flowing per second and the height. The more the amount of water falling on the turbine, the amore the energy is generated.

To generate electricity from water, it is

The Greek were the first nation to use water to

generate energy…China possesses the biggest hydropower stations

worldwide

Renewable Energy

23Issue 52

necessary to provide what follows:

First of all, a dam must be built on a river to keep water behind it to form in turn a wide artificial lake. The potential energy of this huge store depends on the amount of water available in the lake, the level of water, gravity and the following equation:

Potential Energy = mass x gravity x

height

•Themassiscalculatedbykilogram.

•Gravityisequalto9.81m/sqpersecond

• The height is measured by meter. It iscalculated by the height of water flows to the turbine.

When the dam’s water outlet is opened,

water starts to flow strongly influenced by

gravity; in addition, it is converted into

potential energy in water and then into

The amount of energy generated by power stations depends on the amount of

water flowing from turbines

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Jubilee

The ability of dams, water flow, turbines’ efficiency

are key elements control the amount of generated energy

Renewable Energy

dynamic energy. If we ignore the resistance of the pipe in which water flows on its way to the turbine, we dare say that the whole potential energy of water becomes almost dynamic energy which runs the turbine which in turn runs the generator to generate electricity eventually. The benefit of this process depends basically on the efficiency of the turbine, and the amount of energy exhausted during friction and spinning. This process is similar to the dynamo of the bicycle. After that, the generated electricity is transported to the networks with high voltage to trim down the amount of depletion resulted from the resistance of the electrical current in wires. It is worth mentioning that there are other techniques used to generate hydroelectricity such as tide.

Types of Hydroelectricity

Hydroelectricity is an energy which is distinguished with variety and flexible technology. There are four types of hydroelectricity as follows:

Operation from River of Water Energy

The river of water energy is defined as any utility that has canals flowing from the river. This project is usually used as a utility to store very little amounts of water although the movement of the river provides continuous supplies for generating power.

Storing hydroelectricity energy

This system is applied through using the dam in storing water, as electricity is generated through releasing water from the tank to flow through the turbine which activates in turn the generator; the matter helps generating and storing hydroelectricity which can be used independently for weeks or months.

Storing water energy

Storing water provides supplies through harnessing the water which flows between the lower and upper tank of the pumps that

are used by the surplus energy when the demand on electricity decreases. Yet, when the demand is high, the water kept in the tank is released to the lower tank through the turbines to produce electricity.

Marine Water Energy

It is defined as the water which is not completely deep-rooted, as this water increases through using the techniques of the tide or the power of waves to generate electricity. These techniques can be applied together to optimize the amount of power generated by them.

As it is known, most of hydroelectricity is generated by huge power stations installed at dams which are established near rivers. The amount of this generated energy depends

25Issue 52

on the amount of water flowing over the turbines.

Positives of Water Energy

•Itisinexhaustible.

• It ischeapcompared to theotherpatternsof energy.

•Itisalwaysavailable.

•Itisafriendlyenvironmentallyresource,asit does not produce waste.

• The artificial lakes formed from suchprocess can be used for entertainment activities.

Negatives of Water Energy

•Theprobabilityofdestroyingsomenaturalhabitats of organisms in case dams are built, as these habitats which are near the dams may be drowned and then abandoned by organisms and man.

• Fear from the occurrence of disasterssuch as floods which can destroy forests if the dam is not able to contain the huge quantities of water.

•Negativeimpactsonthegeographicalareaslocated near dams, and power stations; the

matter may lead to harmful earthquakes.

•Itisnecessarytoprovidelongdistributionlines for long distances and afford costs.

Hydroelectricity provides about one fifth of the whole amount of electricity used all over the world. China, Canada, Brazil, USA and Russia are listed as the biggest five producers of hydroelectricity in the world in 2004.

The power station of the ‘Three Gorges Dam’ which is located on Yangtze River in China is considered one of the largest hydropower stations in the world. Meanwhile, the largest water plant of the big dam is located on Columbia River in north Washington. It produces over 70% of electricity generated from hydropower utilities in Washington, USA.

In fact, the capability of each dam to generate electricity differs from one to another depending on the height of water level flowing on the turbines and its quantity, the efficiency of the turbine and the generator as well as the aforementioned equation. It is worth mentioning that the largest hydropower station is located in China and it produces about 18000 megawatts, as the efficiency of this station’s turbines and generators is estimated at 90%.

26Issue 52

His Excellency the ambassador of Vietnam to the State of Kuwait Trinh Minh Manh confirmed that Vietnam is keen on reinforcing cooperation with the State of Kuwait in various fields particularly after the success accomplished in oil and gas industry. This ostensible success is epitomized in the establishment of Vietnam Refinery and Petrochemical Complex. Manh urged the Kuwaiti private sector to follow the example of Al-Ghanim Industries Group which has initiated huge economic investments in Vietnam to serve both sides. On the occasion of inaugurating Vietnam Refinery, HE Trinh Manh has emphasized the importance of bolstering bilateral cooperation between the two countries through the following exclusive interview which Alnaf Newsletter conducted with him:

HE Vietnam’s ambassador Trinh Manh talking to Sheikha Tamadher Khalid Al-Ahmad Al-Sabah.


JubileeStrategic Projects

Vietnamese ambassador hails joint collaboration between Vietnam, Kuwait

Trinh Manh: It is important to have strategic partnership between Vietnam, Kuwait in oil & gas

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• Could you throw more light on your vision on oil cooperation between the State of Kuwait and Vietnam? How does Vietnam approach the Kuwaiti investments in energy field?

First of all, I would like to thank you for this interview. It is my pleasure to be your guest, as it is almost the first time to be interviewed by a magazine like yours. Before answering this question, I think it is noteworthy to highlight the significant event epitomized in the inauguration of Vietnam Refinery which took place in a huge and lavish celebration. I was one of those who honorably attended such magnificent event along with delegations and representatives from the State of Kuwait, Japan and top officials from Vietnam. In fact, we are partners in such huge project. It was ostensibly a very successful event which symbolizes the sturdy partnership and constructive cooperation between these countries for several years particularly the recent five years whose tremendous efforts have been crowned with the inauguration of the refinery.

As you know, the process of constructing such refineries witnesses various periods of ups and downs until the project is totally fulfilled. I perceive that such project is one of the important projects which represent the expansion of bilateral cooperation between the State of Kuwait and Vietnam particularly in oil and gas industry; consequently, it has become important for the two countries to become strategic partners in this field which can be a cornerstone for more collaboration in this domain.

I dare say that what we have accomplished together is evidence that we can work together to build sturdy political bases which serve the joint interests of the two countries. We have strong and

We can work together to serve our bilateral

interests based on our joint achievements

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Jubilee

Kuwait’s private sector invited welcomingly to invest

in Vietnam…Al-Ghanim Industries Group is good

example

Strategic Projects

HE Vietnam’s ambassador with Sheikha Tamadher Al-Khalid and Nasser Al-Rujaib.

joint bases for successful economic cooperation. These bases reflect obviously the trust, goodwill and capabilities which the two countries possess particularly that Vietnam has a long history in oil and gas industry rooted in its journey since the period of 1960s and 1970s. Therefore, the refinery and the petrochemical complex project is the concrete basis on which we can reinforce our bilateral cooperation. In this context, I think that the decision taken by PetroVietnam and Kuwait Petroleum Corporation (KPC) to double- in the second- phase the refining capacity of Vietnam Refinery whose current capacity is 200,000 bpd can sturdily reinforce this bilateral collaboration particularly in refining field.

Today, KPC is cooperating with Japanese investors and Vietnamese officials to expand its activities in retail market in Vietnam through fuel and gas stations. Now, we have three or four gas stations of high standards like the European model. In fact, the retail market is also considered one of the cornerstones of the joint cooperation between Vietnam and the State of Kuwait; the matter can be a window for launching more joint investments in participation with the public and private sectors of the two countries.

I would like here to indicate to other investment opportunities available in Vietnam. These opportunities are embodied in the step taken by PetroVietnam and its subsidiaries through selling shares to investors of the private sector to enable the latter to take part in the development process in the country. Accordingly, the two countries have good chances to underpin cooperation in oil and gas field through privatizing some oil projects.

As we are highlighting the bilateral cooperation between Vietnam and the State of Kuwait, I think it is important to mention another field of collaboration between the two countries. This field is epitomized in the contracts of recruiting Vietnamese technicians and laborers to implement Kuwaiti projects inside the State of Kuwait. As I said, Vietnam has good capabilities and accumulated experiences in this domain thanks to its lucrative cooperation with

the former Soviet Union and Russia currently. These efficient and highly-trained workers can provide the technical services required to implement the Kuwaiti projects. I would like seriously to discuss the issue of the qualified Vietnamese laborers with our Kuwaiti partners; in addition, it is possible to get an agreement in this regard within few months, as I can arrange meetings with officials from Kuwait Petroleum International (KPI) and KPC with their counterparts from PetroVietnam to tackle such affairs.

We look forward to meeting the Chief

29Issue 52

Executive Officer of KPC to pose more ways of coordination and cooperation between the two countries. We are sure that Vietnam can efficiently provide good services for the State of Kuwait; in addition, we wish to build strategic partnership with the State of Kuwait in oil and gas field particularly after the State of Kuwait has made sure that Vietnam is an important strategic partner in South Asia. This fact is confirmed by Vietnam Refinery which is the only project through which the State of Kuwait invests in Southeast Asia; the matter qualifies Vietnam to become a cornerstone to provide services for South Asia particularly through its effective membership in the Association of Southeast Asian Nations (ASEAN) which is a sturdy and effective union exactly like the Gulf Cooperation Council which combines the GCC states, as ASEAN is distinguished with a big joint market which is a key gate through which it is easy to penetrate the markets of other several Asian countries.• Are there other fields of cooperation between

the State of Kuwait and Vietnam? There are other several fields through which

the two sides can bolster their joint cooperation such as trade, laborers and tourism. I would like here to indicate to the amount of the commercial exchange between the two countries, which it is estimated at $3 billion approximately. Moreover, we seek to underpin bilateral cooperation in industry field, as Vietnam is considered one of the important industrial hubs in Asia; the matter has encouraged Al-Ghanim Industries Group to invest in steel in Vietnam. Despite of these strong bilateral ties, we look forward to more collaboration with the Stat of Kuwait in several fields such as the domestic personnel. We seek an agreement with the State of Kuwait to organize the process of dispatching Vietnamese personnel to Kuwait particularly that the number of Vietnamese laborers in the Kuwaiti labor market reaches about 1300.

With reference to tourism sector in Vietnam, I would like to indicate that Vietnam is not unfortunately a very familiar destination for

the Gulf tourists although it is distinguished with several fascinating tourist place; besides its attractive geographical mountains and its wonderful weather; therefore, we exert tremendous efforts to attract more tourists particularly the Kuwaiti tourists.

In this context, I would like to indicate that Vietnam received in 2018 more than 15 million tourists from all over the world. Those tourists came to enjoy its fine weather and astounding mountains. The Vietnamese weather is distinguished with variety. In other words, tourists can enjoy the four seasons of the year in one time particularly in the south. Eventually, we have several fields of bilateral cooperation but we focus on oil and gas sector due to the available sturdy and common bases between the two countries.• International economic reports refer that

the Vietnamese economy is ostensibly promising in the southeast of Asia. Is there coordination between the Kuwaiti government and its Vietnamese counterpart to make Vietnam an essential hub for energy?

I indicated implicitly to that in my previous answer. In fact, you are right Vietnam is one of the fastest and growing economies in the world, as the growth rate of its economy reached 7% in 2018 which is considered a big percentage in business. We are luckily located in a dynamic and active economic region in East Asia; therefore, we benefit from the growth of the Chinese economy in the north and the Indian economy in the south. Our country is distinguished with a stable and promising market in which about 100 million consumers benefit from the petrochemical products, oil and gas products; therefore, Vietnam possesses all constituents which qualify it to become a hub for oil

Vietnamese personnel highly qualified, experienced to

work in Kuwait

30Issue 52

and gas industry in the region. Add to that, the Stat of Kuwait can store its oil products and distribute them later in a time when prices become good. All these capabilities represent an essential basis to underpin the bilateral cooperation between the State of Kuwait and Vietnam; in addition, it enables the latter to become an economic hub for the State of Kuwait in South Asia. Therefore, we need to pay mutually high-level visits between the countries to tackle such considerable objective.• Under the success of the Vietnamese refinery

experience, what about the possibility of developing oil cooperation with the State of Kuwait in the future?

Indisputably, the success of Vietnam refinery project helped us effectively to recognize our capabilities as important partners. Now, we know well what we can achieve together and how we can underpin the bilateral cooperation in all fields particularly in engineering and qualified technical personnel. I’d like to indicate that the Vietnamese partners realize well the

fact that they cooperate with reliable Kuwaiti partners who are able to pump investments and guarantee the achievement of projects as well.

We know each other very well; moreover, we have a clear vision, trust and the projects through which we look forward to doubling the amount of the existing business between the two countries. It is time to think seriously about the future. In fact, I look forward to meeting His Excellency the Kuwaiti minister of oil and the KPC’s new Chief Executive Officer to pose related ideas and visions which help accomplish the joint goals of the two countries. Consequently, the concerned Vietnamese delegations will be necessarily invited to meet with their Kuwaiti counterparts to tackle such proposals and visions to bolster the bilateral collaboration between the two countries.• As for cooperation between the Vietnamese

private sector and its Kuwaiti counterpart in energy field, is there a clear vision in this domain?

I perceive that we managed outstandingly



31Issue 52

to underpin the bilateral cooperation with the Kuwaiti side in oil and gas sector, as we provide an appropriate environment for investment and collaboration. In addition, we provide job vacancies for laborers; therefore, we are able to reinforce the participation of the private sector in development. This encouraged the Kuwaiti private sector to invest in the growing Vietnamese market; the matter leads to more prosperity and growth for the Kuwaiti and Vietnamese private sectors.

Vietnam RefineryKuwait Petroleum International (KPI),

which is the external arm of KPC for foreign investments, inaugurated in December, 2018 Vietnam Refinery project which is developed by a consortium of Kuwait Petroleum International (KPI, 35.1 percent), Idemitsui Kosan Co. (IKC, 35.1 percent), and Mitsui Chemicals (MCI, 4.7 percent). The rest is contributed by state-run Vietnam Oil and Gas Group (PetroVietnam). This project has the largest scale and total

investment capital which is estimated at $9 billion approximately.

Vietnam Refinery, which is commonly known as Nghi Son Refinery, is located at about 260 kilometers south of Hanoi in Nghi Son economic area which provides several advantages such as the rent and free taxes on the income of the company and individuals; besides the import and export free taxes. Add to this the merits of the marine destinations which ease the process of exporting and importing.

Gulf tourists especially Kuwaiti nationals warmly

invited to enjoy Vietnamese fascinating sceneries, fine

weather

32Issue 52

Nghi Son Refinery is considered one of the gigantic and important projects in energy field particularly under the growing demand on oil products in the key strategic markets in Asia.

Vietnam refinery is considered a secured outlet for the Kuwaiti oil for the long-run, as it has the ability to refine about 200,000 bpd; the matter helps provide the local market with its products and meet the local needs of oil products.

This project is in liaison with the 2040 strategic plan of the State of Kuwait regarding its external investments which can achieve profitable revenues among KPC framework which targets investments in strategic and promising markets. It is worth mentioning that the refinery provides refined petroleum products such as LPG, high-octane petrol, diesel, jet fuel, sulfur, paraxylene and polypropylene. These refined products will be sold in the Vietnamese local market; whereas the petrochemical products will be sold to Japan’s Idemitsui Kosan Co, Kuwait’s

Petrochemical Industries Company (PIC) and other international agents.

It is worth mentioning that Nghi Son Refinery achieves other several benefits for KPI such as the wide network of international relations with international experienced partners; the matter provides experience for the employees of KPI and KPC who work in such gigantic projects.

As for Vietnam, Nghi Son Refinery is a very important project for the country as it is the second of its kind in Vietnam after Dung Quat Refinery, as it will meet about 70% of the local needs from refined oil products; besides developing and improving the skills of local personnel.

It epitomizes integration between refining and petrochemical industry which leads to achieving the added value; in addition, it is a wide gate through which small companies can participate in development projects in the country.



Article

By/ Sheikha Tamadher Khalid Al-Ahmad Al-Sabah

Pursuant to the Amiri directions of HH the Amir Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah to prioritize the development of manpower as such element is one of the key pivots of the State of Kuwait’s 2035 vision and a key stipulation to achieve sustainable development, the Kuwaiti oil sector has stepped forward to fulfill a specific leap in the field of manpower development to cope with the amount and needs of its capitalistic projects and 2040 strategy which is aimed to boost the status of the Kuwaiti oil industry internationally. Consequently, it has taken some important steps in this domain focusing on the necessity of reinforcing partnership with the local private sector and the international companies.

Indisputably, the inauguration of Vietnam Refinery project is deemed a tangible model of the constructive cooperation between Kuwait Petroleum International (KPI), which is the external arm of investment for the State of Kuwait, Japan’s Idmitsu Kozan Co. and Petrovietnam. This epitomizes the

ability of the Kuwaiti oil sector to build long-term partnerships with huge oil companies that possess the technology and experience which the Kuwaiti oil sector needs to accomplish sustainable development.

In fact, Vietnam Refinery project does not only provide a safe outlet for the Kuwaiti crude or achieve an economic feasibility for the refinery’s petroleum products, but it will also help the Kuwaiti personnel to share and exchange technical experiences through dealing with the latest modern technologies applied in the refinery; the matter helps them to be up-to-date with any new development or innovation taking place in refining industry. These benefits are definitely as important as the economic return particularly under the incessant efforts exerted by the State of Kuwait to fulfill integration between refining and petrochemical industry; besides underpinning joint collaboration between the Kuwaiti and non-Kuwaiti personnel; the matter helps develop personal skills and sustain the culture of work.

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34Issue 52


JubileeSpotlight

First oil well in GCC states explored in Bahrain

Kingdomof Bahrain enters oil world through ‘Mountainof Smoke’ oilfield

After exploring oil in Iran in 1908, the Gulf region attracted ostensibly the attention of the international energy companies. In fact, the British government managed unprecedentedly to get the concession of drilling for oil in several countries in the Gulf region on top of which the Kingdom of Bahrain which is considered the first GCC country which commenced the activity of drilling and exploring oil, as it established in 1929 Bahrain Petroleum Company (BAPCO) which was registered in Canada. In 1930, Production Manager accompanied by a large number of geologists arrived in the Kingdom of Bahrain and initiated some on-field examinations to select the appropriate drilling sites. After that, some drillers started the drilling activities on the chosen sites. Accordingly, the first oil production in the Kingdom of Bahrain started on June 21, 1932 by 9600 barrels per day at the depth of 2008 feet. Nonetheless, such exploration was not considered a complete success for the company due to that humble amount of explored oil; besides the complete absence of any quantity of gas; the matter caused the shortage of the natural pressure which is required to pump oil to the surface. Therefore, it was necessary to start drilling another oil well. Luckily, the concerned officials of BAPCO were fortunate as oil was pumped strongly that time with bigger quantities than before by 16900 bpd from a well located in the ‘Mountain of Smoke’ in the Kingdom of Bahrain to become the first oil well in the Arabian Gulf region. Consequently, the Kingdom of Bahrain exported its first cargo of crude oil in June 1934 to Japan on board the Naval Segundo Ship.

35Issue 52

The large commercial quantities of crude oil pushed courageously BAPCO to start negotiations with the Bahraini government in late 1934 to get a new 55-year-concession to continue drilling and exploring crude. These continuous successes fulfilled by BAPCO encouraged the Kingdom of Bahrain to possess the whole BAPCO which has moved ahead to accomplish its vision which is aimed to implement several related activities on a wide range particularly the activities of selling and exporting crude oil. As a result of that, the company managed to get the trust of clients and customers in the Middle East, the Far East, Southeast of Asia and Africa.

BAPCO didn’t disregard the important role of oil products and distillates along with the crude oil to achieve an added value to economy; accordingly, it established a refinery in 1936 with refining capacity estimated at 260,000 bpd approximately. This refinery is considered the oldest one on the level of GCC countries. BAPCO has also other facilities such as storing utilities which can contain over 14

million barrels; besides a marketing station and maritime station for the petroleum products. It is also in charge of providing the Bahrain International Airport with jet fuel and natural gas to operate its utilities; besides providing other variant industries in the Kingdom.

It is noteworthy to indicate that BAPCO is keen on preserving the environment through underpinning the initiatives and efforts aimed to protect the environment. It keeps incessantly putting forth diligent efforts to sustain the journey of the economic development in the Kingdom of Bahrain since the date of exploring oil in the Kingdom. We cannot disregard the tremendous efforts exerted by the Kingdom of Bahrain to develop the hydrocarbons to underpin its national economy. These endless

Bahraini first crude cargo dispatched to Japan on

board Naval Segundo Ship

36Issue 52


JubileeSpotlight

efforts include what follows: • Establishing CALTEX and TEXACO in

1936.•BAPCOwastotallypossessedbytheBahraini

government in 1936, and it became one of CALTAXsubsidiaries.

• Expanding a pipeline from the Kingdomof Saudi Arabia to the refining plant in the Kingdom of Bahrain in 1945 to refine some of the Saudi crude oil.

•Inauguratingthefirstpowerstationoperatedwith natural gas in the Arabian Gulf area to generate electricity in Juffair area on April 30, 1959.

• Producing oil from Abu Sa’fah marineoilfield in 1966. It is a joint oilfield between the Kingdom of Bahrain and the Kingdom of Saudi Arabia.

•EstablishingBahrainNationalGasCompany(Banagas); besides establishing Gulf Petrochemical Industries Company (GPIC) in 1979.

• Establishing Bahrain Aviation FuellingCompany (BAFCO) in 1985.

•PossessingthewholerefinerybytheBahrainigovernment (100%) in 1997.

•IssuingthedecreeofestablishingNationalOiland Gas Authority (NOGA) in 2005 followed by establishing the holding company in 2007 to become NOGA investment arm.

•EstablishingBahrainNationalGasExpansionCompany (BNGEC) in 2008.

• Establishing Petroleum DevelopmentServices Company in 2009.

•EstablishingBahrainLubeBaseOilCompanyin 2009.

•EstablishingBahrainLiquefiedNaturalGasCompany in 2015.

• Possessing a share in US OccidentalPetroleum Corporation and UAE Mubadala Development Company in the venture of developing Bahrain oilfield in 2016. Later on, Petroleum Development Company

has been totally possessed by the Bahraini government. Pursuant to the directions and desires given

by the Bahraini Custodian His Majesty King Hamad bin Issa Al Khalifa to prioritize oil exploration operations to augment the resources of the kingdom, the Higher Committee for Natural Resources and Economic Security allotted elaborate plans to double the operations of exploration and drilling. Consequently, NOGA and all Bahraini national oil companies have been directed to improve the level of the geological survey through applying the latest available technologies and drilling

37Issue 52

more exploration wells with the help of the international companies which work in such field. These tremendous efforts brought their fruits in April 2018 through exploring the biggest oilfield in the history of the Kingdom after exploring a considerable resource of light shale oil whose reserves are much bigger than the reserves of the main oilfield in the Kingdom. The reserves of this ostensible exploration are estimated at 80 billion barrels per day; besides the probable reserves of natural gas which are estimated at 10-20 trillion cubic feet.

The Higher Committee for Natural Resources and Economic Security announced

that such exploration is considered the first of its kind since 1932 when the first oil well was inaugurated in the Kingdom, adding such new exploration will effectively take part in the competitive capabilities of the Kingdom to carry out the projects and development initiatives as well as meeting the

Bahrain possesses the first and oldest refinery in GCC states with capacity estimated at 260,000 bpd

38Issue 52


JubileeSpotlight

Kingdom’s oil obligations. Gulf Refining Union (GRU)

To bolster collaboration among all GCC oil companies, the GCC ministers of oil and energy agreed at forming the Gulf Refining Union (GRU) during a session held on July 11, 2016. In addition, they selected the Kingdom of Bahrain as a headquarters; moreover, they chose Eng. Bakhit Al-Rashidi, the former Chief Executive Officer (CEO) of Kuwait Petroleum International (KPI), and former Minister of Oil, former Minister of Electricity and Water in the State of Kuwait from 2017 to 2018, as a chairman of the union.

GRU is aimed to allot the strategic plans required to achieve the key objectives which GCC countries are looking forward to achieving in such essential field on top of which establishing a sturdy international and regional network of relationships, developing and improving the services of oil and gas sector, unifying efforts and implementing the programs of the national transformation in the whole Gulf to participate effectively in connecting all GCC member countries in the projects of refining industry regionally and internationally. These objectives are also aimed at attracting influential training and development programs, conveying and sharing technology, easing the process of communication, exchanging knowledge and experiences among institutions and investment authorities, improving the efficiencies of

employees who work in such field and playing a substantial role in pushing forward the wheel of GCC economic and social development; besides reinforcing the status of petroleum in growing the international economy.

In fact, the sturdy return of big oil producers such as Iraq and Iran to the international oil market led to founding GRU; the matter helps increase competitiveness on the marketing quotas for crude and its distillates. In addition to that the huge projects which GCC countries promulgated in production and refining field; accordingly, it has become mandatory for GCC countries to unify their efforts to be able to confront and surmount efficiently the challenges and fluctuations of oil markets to preserve their good and their leadership in energy field.

This takes part in sharing and exchanging experiences among all GCC monarchies and developing the local industries to gradually reduce dependence on the foreign companies. It is also a considerable opportunity for GCC states to benefit from the huge financial revenues through conveying technology and experiences among all companies work in oil markets regionally and internationally.

As a matter of fact, the step of establishing the Gulf Refining Union (GRU) came in the wake of the demands to launch local joint oil projects particularly in the field of oil production technology, refining, and petrochemicals to compete the foreign companies and underpin

Establishing int’l, regional network of relations, developing services of oil & gas

sector are key motives of forming GRU

39Issue 52

the projects of national conversion as well as unifying the efforts of depicting a precise and obvious Gulf oil policy particularly through joining more Gulf oil companies to the union.

It is noteworthy to indicate that the State of Kuwait, the Kingdom of Bahrain and the Kingdom of Saudi Arabia provide GRU with the required logistic support and encouragement to underpin its status and their ties.

Observers perceive that GRU will play an influential role in attracting investments, expos, conferences and other accompanied

activities; besides encouraging the concerned bodies to found oil companies and training institutes; in addition to holding specialized oil programs internationally. It will further play an essential role in tackling other issues and facilities provided by the Bahraini government to ease fulfilling all development initiatives launched by the union as per the foundational system and law to enable the international oil companies to take part effectively in the various strategic initiatives such as conferences and exhibitions.

GRU provided with logistic support by its

member countries

40Issue 52

Features & Directions of GCCPetrochemical Industries


JubileeStudy

41Issue 52

The exploration of oil in the beginning of the last century in the Kingdom of Bahrain is an ostensible start for a dramatic change in the history of GCC countries, as such exploration epitomized the gate for the development of industries that depend basically on oil and its distillates on top of which the petrochemical industries.

1.1: Optimizing the added value of oil resources

In fact, the impact of exploring oil in GCC countries on their prosperity was very humble in its beginning because the foreign oil companies controlled the amount of oil production and its prices; besides the humble financial return which they receive due to the concessions granted to these companies to drill and produce oil. However, GCC countries began to benefit economically from such new resource in the 1960s; accordingly the governments of GCC countries started to think seriously of establishing basic industries which can utilize natural gas which was burned in production flares in oilfields.

This tendency is based on two factors; the first is the need to vary the national economies and reduce the direct dependence on the fluctuated oil revenues; whereas the second element is the desire to optimize the value of the associated gas which was depleted by flaring in air causing pollution; besides losing an exhaustible natural resource. Nonetheless, the high pressure of oil reservoirs and the abundance of oil production which reaches thousands of barrels per day without any pumps led to augmenting the rates of production constantly accompanied with gas which was flared due to its low marketing value at that time because of the high percentage of the poisonous hydrogen sulfide (H2S) whose odor is hideous; in addition, it causes corrosion; that why the choice of flaring the associated gas in air was the most proper choice at that time.

In fact, the process of burning the associated gas was carried out in all GCC countries as per the amount of each country’s oil production, and OPEC data registered in 1979 which are listed in Table no. 1.

Table (1)The amount of gas flaring in the four GCC countries

which are members in OPEC reached about 1843 billion cubic feet; whereas the percentage of gas flaring in the State of Kuwait was estimated at 27% out of the total amount of produced gas; whereas that the percentage reached about 75% in the Kingdom of Saudi Arabia.

Indisputably, such high percentages of gas flaring irked each GCC citizen and official who passes near oilfields and sees the flares going up in the sky day and night. Accordingly, it has become necessary to put an end to such huge environmental pollution caused by depleting big amounts of associated gas; the matter provoked the GCC governments to put such environment problem on top of their priorities.

Pursuant to the data clarified in Table no. (1.1), three quarters of the quantities of associated gas in the Kingdom of Saudi Arabia were flared in air. There are several reasons led to getting rid of gas by such way among which the lack of having local market for gas at that time. Add to this the high cost of exporting it as a liquefied gas, because it requires huge investments to liquefy it using gigantic thermal exchanges; besides cooling it at less than ‘-160’ to ease storing and transporting it in very large tankers which are designed to afford high pressures to keep the liquidity of gas until it is delivered to its markets.

It is worth mentioning that the technologies of liquefying and transporting natural gas were not developed like today. These considerations didn’t give GCC countries many options except to inject these amounts of gas to oil wells or to flare it. Unfortunately, these two options are not useful for economic and technical considerations.

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JubileeStudy

1.2: First GCC Chemical PlantsThe earlier efforts put forth in this field

were initially exerted in the second half of the 1960s in the State of Kuwait, the Kingdom of Saudi Arabia and Qatar to use gas as ‘feed’ to manufacture chemical products. The associated natural gas is composed of methane, ethane, propane and butane which are in the form of normal gas under the normal pressure and room temperature. However, their percentage differs as per the kind of gas and

its resource. Moreover, methane is considered the main component of this mixture, as its percentage reaches about 75-90% of the total components. It is possible to produce a number of important materials from methane among which methanol, ammonia and urea which is used as chemical fertilizers. Accordingly, the first manufacturing installations of chemical industry sector in GCC are specialized in manufacturing methanol and chemical fertilizers.

Table (1.1): The amount of gas flaring in GCC countries in 1979

State Amount of Gas Flaring

(billion cubic feet)Percentage of gas flaring to

whole production (%)*

United Arab Emirates 293 60.9

Kuwait 127 27.4

Qatar 81 34.7

Saudi Arabia 1.342 75.1

Total 1.843

Source: OPEC annual statistic pamphlet.*The percentage of gas flaring which isn’t used as fuel in the industrial, commercial and housing sectors.

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Table no. (2)In fact, the beginnings of establishing such

industry in the Gulf region in the 1960s and the 1970s confronted several challenges and difficulties among which the lack of infrastructures and the qualified personnel required to operate and run plants; besides the designs and marketing activities although some projects were implemented in participation of foreign companies. However, these challenges and difficulties represented at the same time a good opportunity for building local experiences which have proved their efficiency and ability to achieve profitable projects later.

1.3: Natural Gas… Fuel of Development Locomotive

Natural gas has played an influential role in pushing forward the locomotive of industrial development in GCC countries, as its supplies

represented the locomotive of the rapid growth fulfilled in the heavy industries which consume a lot of energy such as steel, aluminum, fertilizers and petrochemicals.

Gas reserves in GCC countries are classified into two kinds; associated gas which represents two thirds of the gross proven gas reserves; whereas the other one is the non-associated gas which is also called the ‘dry gas’ and it represents one third of the gross proven gas reserves. The associated gas is rich with ethane which is considered the favourite feed used in petrochemical industries; besides the large number of petrochemical distillates which can be produced by ethane that represents 16-18% of the constituents of the associated gas; whereas its percentage in the non-associated gas is nearly 3.9%. This frame helps clarify the variety in the petrochemical industries which appeared in the Gulf area influenced by the amount of the proven reserves and the kind of gas as per Table no 1.3.

Table (1.2): Earlier GCC Chemical Companies

Company Country Year of Operation

Important Products

PIC Kuwait 1966/ 1967Ammonia/

Urea

SAFCO Kingdom ofSaudi Arabia

1969Ammonia/

Urea

QAFCO Qatar 1969Ammonia/

Urea

GPIC Bahrain 1985Ammonia/ Methanol

FERTIL Abu Dhabi, UAE 1983Ammonia/

Urea

OMIFCO Oman 2005Ammonia/

Urea

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JubileeStudy

Table no. (3)The high percentages of ethane which are available in the associated gas in the Kingdom of Saudi Arabia and Abu Dhabi, UAE give access to expand the production of ethylene which is used in turn in producing several distillates locally. Meanwhile, the abundance of the non-associated gas in the Kingdom of Bahrain and Oman helped develop the chemical industry which depends basically on methane such as urea, methanol and ammonia.

The production of the associated gas is adherently linked to the level of crude oil production which depends in turn on the actual productivity which is allotted as per the quota of production allotted by OPEC.

It is possible to identify the phases of the Gulf petrochemical industry’s growth particularly the Saudi industry in liaison with the kind and amount of the ‘feeds’ available for such industry as follows:

1- The first phase (1981-1994): The biggest

Table (1.3): Proven gas reserves and its kinds in GCC states – 2016

State Proven reserves(trillion cubic feet)

Percentage out of int’l

(%) reservesKind of Gas

Percentage of methane

(%)

Bahrain 6.1 0.1 Non-associated 4.5

Qatar 866.2 13.1 Non-associated(dry) 5.3

Kingdom of Saudi

Arabia294.0 4.5

Associated (61%), non-associated

(39%)

16.74.5

Kuwait 63 1.0 Associated 17.2

Abu Dhabi 215.1 3.3 Associated 10

Oman 24.3 0.4 88% non-associated (dry) 5.6

Gross 1.468.7 22.2 %

Source: BP Statistical report 2016 & other sources

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part of feed was provided by the associated natural gas; therefore the whole production of ethylene in SABIC during that period was fed with ethane 100%. As the whole industry depended only on the associated natural gas at that time, the products which were produced were methane, methanol, MTBE, ammonia, urea, ethylene, polyethylene and glycol-ethylene.

2- The second phase (1994-2009): The liquids of propane C3, butane, ethane C2 and methane C1 were used as feeds during that phase; accordingly, the base of products from basic petrochemicals expanded to include propylene, polypropylene, polyethylene, polystyrene and butadiene …etc.

3- The third phase (2009 till present): A mixture of gas and liquid oil distillates were used in this phase such as naphtha in refineries. In fact, this phase has witnessed an ostensible expansion in the base of basic products to include aromatics such as petrol, toluene and paraxylene. The use of naphtha as ‘feed’ helped expand the base of the intermediate products of this industry to include products of high value such as polymers and specialized chemicals.

4- The fourth phase to start in 2023: It will include products which are capable of converting oil directly into developed chemicals by SABIC and Aramco. This step is scheduled to come into effect in the near future in Yanbu City, KSA to handle the problem of gas deficit.

1.4: Conversion to an international hubAs the supplies of natural gas have played a decisive role in identifying the amount and kind of products of this industry since it was launched, the abundance of these supplies has played an influential role in identifying the rates of growth in the region; the matter directed GCC petrochemical companies to build plants whose productivity is considered the highest worldwide. In addition, it has enabled GCC producers to employ their capabilities to trim

down the costs of production, and reinforce the competitiveness of such industry which is adherently connected to the decrease of the changeable costs of materials and fuel in particular. For example, the rate of ethylene production units in the Kingdom of Saudi Arabia reaches about 1.2-1.3 million tons per year; whereas this production reaches about 1.5 million tons per year in Borouge Abu Dhabi Polymers Company Ltd. It is worth mentioning that Borouge’s production of ethylene is considered the highest worldwide. No doubt that the success in establishing big units of petrochemical production in GCC countries and the small size of the local market led to adopting the strategy of exporting this industry’s products abroad to provide safe outlets for them. The distinguished location of GCC countries which are near the key markets in east Asia; besides the low cargo costs in the region thanks to the merit of ‘back-hauling’, which provides low prices for cargo companies to ship containers to Asia after discharging them in GCC countries, helped GCC producers to manage successfully to apply such strategy. Moreover, the success of applying that strategy took part effectively in providing the developed infrastructure in a number of GCC ports on top of which Jebel Ali Port in UAE; the matter helped GCC industry to keep its high export percentages comparing to the amount of production. Despite the expansion in the amount of consumption in the local market due to the expansion in GCC conversional industries, the percentage of exports has been kept its status during the recent three decades at the rate of over 80%.

Undoubtedly, such tendency helped GCC industry to occupy a high status in the trade of chemical commodities internationally, as the share of GCC countries from the gross international trade in 2016 reached 76% of glycol-ethanol and 51% of polyethylene of high density, 56% of polyethylene, 33% of methanol, 58% of Methyl Tert-Butyl Ether (MTBE) and 4% of polypropylene.

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GCC countries’ share of int’l trade for some commodity petrochemical products- 2016

Picture no. (4)The expansion of productivity and the high

percentages which GCC industry managed to achieve internationally enabled GCC countries to occupy advanced ranks among the chemical producers.

As per Table no. (3-4), five of GCC countries

occupy the first one-third of the list of chemical producing countries worldwide particularly the Kingdom of Saudi Arabia which occupies the 15th rank in 2016 in a list includes 160 countries export chemicals according to the World Trade Organization (WTO).

Picture no. (5)

Table (1.4): Int’l rank of GCC countries as per their chemical exports

Country International Rank Change in

order2010 2016Saudi Arabia 18 15 + 3

Qatar 41 53 - 12Abu Dhabi 47 31 + 16

Oman 52 58 - 6Kuwait 46 52 - 6Bahrain 96 74 + 22

*This order includes 160 countries. Source: World Trade Organization 2018

Polyethylene of low densityPolyethylene of high densityGlycol-ethylene

Methanol MTBE

Source: Gulf Petrochemicals and Chemicals Association’s (GPCA) database- 2018

Polypropylene

Share of countries in the world

Share of GCC countries

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The third characteristic which distinguishes the Gulf industry throughout its development journey is its success in producing commodity petrochemicals which are produced with very big quantities as per unified standards. This helps ease the operations of marketing and distribution relatively compared to the specialty chemicals which are produced with small amounts relatively with certain standards to serve certain applications as well. Additionally, the Gulf industry has moved towards the commodity products; therefore, it is clear that the journey of petrochemical industry in GCC countries focuses on commodity products which represent about 99% of the gross GCC production.

Recently, other tendencies came into the surface in the Saudi industry, as it moved to producing ‘specialty chemicals’ and ‘performance chemicals’ among which polymer engineering such as butyl acrylate and super absorbent polymers and butyl rubber, EPDM and Polyvinyl acetate (PVA). These new products will create new conversional industries which will in turn augment the added value fulfilled by the producing companies. The production data of the specialty chemicals reaches about 249,000 in 0.4% of the total production of the Gulf industry in 2006. This number doubled up to 2.36 million tons which represents 1.5% by 2016.

It is noteworthy that the amount of specialty chemicals production doubled by 9.5 times quantitatively but it increased by six times only relatively due to the massiveness of expansion in commodity products production. The total production of chemicals and petrochemicals of the six GCC countries reached about 154 million tons annually by the end of 2016. Moreover, the Kingdom of Saudi Arabia occupies the first position in terms of production, as its share reaches about two thirds of the whole petrochemical production of the six GCC countries. Then, Qatar and Abu Dhabi come after it by 13% and 10% respectively.

In fact, the rapid and continuous growth of the petrochemical industry in GCC countries

is based on several capabilities which took part effectively in achieving such ostensible growth rates regionally and internationally, as this growth rate of this industry increased tangibly during the recent two decades by 10% which is almost more than the double growth rate of the international industry in the same period – about 4% only. Accordingly, the gross productivity of the Gulf industry doubled between 2006 and 2016 to reach about 154 million tons annually compared to its level which was nearly 25 million tons per year in 2006.

There is another criterion which identifies the direction of growth and the sequential expansions in the GCC petrochemical industry. This criterion is epitomized in the feed ‘ethylene’ which is not only considered the most important unit in the petrochemical industry because of the highly valued products produced by it, but it is also produced locally; in addition, only a little amount of it is exported due to the high cost of cargo, as it needs special containers that can afford high pressure. Accordingly, the amount of producing ethylene is considered a significant index for the industry growth in any area in the world.

On the GCC level, the productivity of ethylene has expanded in the State of Kuwait, Qatar, Abu Dhabi, UAE and the Kingdom of Saudi Arabia since this industry was launched in 1980s. This growth of ethylene productivities was associated with similar growth for the productivities of ethylene distillates such as glycol-ethylene and the different kinds of polyethylene; the matter helped the Arabian Gulf region to be listed among the most important production hubs of ethylene worldwide. These high rates of productivities helped the Gulf industry to underpin its pioneering status internationally in a number of petrochemical products particularly the products of ethylene and methane. Today, the Gulf petrochemical industry occupies advanced positions in the following products:

Ethylene whose production is estimated at 25.5 million tons per year from GCC countries; thus, it represents 15.5% of the international production.

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Ethylene-glycol which GCC petrochemical industry produces by 6.7 million tons per year representing about 22.2% of the international production.

Polyethylene of high density whose productivity rate is about 7.4 million tons per year on the Gulf level representing about 16.6% of the international production.

Polyethylene of low density whose productivity rate is about 7.4 million tons per year on the Gulf level representing 14.9% of the international production.

Consequently, the GCC countries’ share of production increased internationally from 3% in 2006 to 7% out of the gross international production by the end of 2016.1.5: External Expansion & Inorganic Growth

Companies especially the ones which work in the petrochemical sector grow through two mechanisms; the first one is by adding productivities through expanding existing projects or building new ones. This mechanism is called ‘organic growth’; whereas the second mechanism which is called ‘inorganic growth’ is based on merging or possessing existing companies or projects. It is possible to classify possession bargains into two groups as follows:

Strategic possession operations: These operations are connected to the company’s strategic goals such as conveying technologies, modern management methods and how to penetrate the international markets. These goals include the establishment of entities which possess what is called ‘critical mass’ which is significant to reinforce competitiveness in an international industry like petrochemicals.

Opportunistic possession operations: These operations are available as a result of re-structuring or changing a company’s strategy due to changing its activity or selling its existing plants.

However, the operations of possession or merging have also risks; in addition, they need a lot of time and effort before being reflected negatively or positively on the performance of the entities yielded from such operations. Yet,

they are still an important strategic tendency for the company’s growth because they shorten phases; moreover, they are capable of penetrating the international markets.

As for GCC petrochemical companies, the journey of their external expansion has been set off to possess productive assets worth $26.5 billion during 2002 and 2016. These possession operations coped with the expansion of the activities of the Gulf pioneering companies leaning on the principle of the joint projects launched in cooperation with foreign partners in external markets through which these companies can expand their activities in main petrochemical markets whose growth rates are high and their prices are competitive.

Looking forward to the FutureThe growth of chemical industry represented

historically 1-2.5%; in addition, its performance is directly linked to the demand on oil and oil prices in the international markets, as the oil distillates particularly naphtha is considered one of the most important outputs of production for petrochemical industry in Asia and Europe in particular.

Based on reports and estimations issued by International Energy Agency (IEA) in 2017, the growth in the demand of oil and its distillates by the petrochemical sector will be the highest among the sectors which consume oil registering a hike estimated at 11 million bpd in 2015 which represents 12% of the international consumption of oil. In addition, this hike will increase gradually up to 15.5 million bpd in 2040 to represent about 15% of the international consumption of oil in this time. These reports and data clarify the fact that the growth in the international petrochemical industry will continue with high rates in the coming two decades.

Source: Part of work paper submitted by Dr. Abdulwahab Al-Saadoun, Secretary-general of the Gulf Petrochemicals and Chemicals Association (GPCA), in the 11th Arab Energy Conference entitled ‘Energy and Arab Cooperation’ which was convened in Marrakesh, the Kingdom of Morocco between 1-4 October, 2018.

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