Kuwait-Iraq border opening & Vitol eyeing up Libya

“There is kind of initial approval from Kuwait’s side”, Abdul-Mahdi al-Amedi, director-general of the Oil Ministry’s Petroleum Contract and Licensing Directorate (PCLD) told Reuters, adding that “this information we got from the contracting companies who said they talked with the Kuwaiti government, and that there is an initial approval to use the road that is close to Safwan and passes through Rumaila oilfield”.

Kuwait’s border with Iraq is close to most of the fields awarded to IOCs for development in last year’s two licencing rounds, and oil companies have already started complaining that bureaucratic hold-ups and inadequate port and road capacity are delaying mobilisation and the full-scale launch of work on the fields, where they are under tight deadlines to deliver incremental oil production capacity. There have also been problems with the speed of processing equipment, machinery, and personnel at Iraqi borders and airports.

IHS senior Middle East energy analyst Samuel Ciszuk commented:

“Kuwait has a lot to gain in becoming more of a transhipment hub for Iraq, which it could achieve very quickly given the advanced and well-maintained state of its own infrastructure and its proximity to the likely future Iraqi oil boom.”

“Oil companies will definitely need to use Kuwait for much of their logistics, offering a tremendous business opportunity for Kuwait’s strong logistics companies, which are seeing the scaling-down of business provided by the US Army since the 2003 Iraq invasion. This is likely to mean that there will be little political resistance or bureaucratic red tape for border crossing improvements from the Kuwaiti side, although the heavy bureaucracy on the Iraqi side still might make some of these issues time-consuming to solve, despite Oil Minister Hussein al-Shahristani’s own initiative to involve other key ministries in a high-level red tape-cutting exercise.

Vitol Visits Libya’s Zawia Refinery, Eyes 50% Stake

Swiss oil trader Vitol is eyeing a potential investment in Libya’s ageing 120,000bpd Zawia refinery, with Platts reporting that a group from the company has recently visited the facility on a fact-finding mission. Libya’s National Oil Corporation (NOC) has been looking for an investor to become a joint venture partner in the refinery, hoping to attract badly needed investments in upgrade work. A Vitol source told Platts the visit was only preliminary in nature and that “the company was basically looking at ways to improve yields from Zawia and produce higher quality refined products as well as possibly supplying crude to the refinery”.

Meanwhile, HSBC bank is understood by the Middle East Economic Digest (MEED) to be continuing its financial advisory to the state-owned Zuwara Refining Company (ZORCO)—a subsidiary of Tamoil Afrique (owned by the NOC and separate from the Libyan-owned European refiner and retailer Tamoil, which is now owned by the Libyan Investment Authority) about finding an investor for its planned 200,000bpd grassroots refinery project. Foster Wheeler was chosen as the project management consultant in 2008, and in 2009 South Korea’s POSCO and SK Engineering won US$5-billion-worth of construction contracts—of which, however, nothing seems to have come.

“Regarding the Zuwara project,” Ciszuk said that “reports that HSBC is actively advising the search for investors is somewhat surprising given recent NOC signals. As late as earlier this week, Platts quoted NOC chairman and de facto Libyan oil minister Shukri Ghanem as saying that his country was not planning to build any new refineries. Progress on Zuwara has also been reported as minimal to date.”

He said that “Vitol’s interest in Zawia too comes as a bit of surprise, not because the company’s track record in turning around and modernising refineries is in doubt, but because Libya’s government until recently propagated a total trade embargo against Switzerland, where international player Vitol is domiciled. Libya has, however, struggled to find investors into its refining sector for many years now, which is likely to be forcing some increasing pragmatism when it comes to the choice of partners.”