Kuwait's Al-Zour refinery restores output as wave of new supplies on horizon

Kuwait's Al-Zour refinery has restored full operation of crude distillation units 1 and 2, with output back up at 345,000 b/d, a spokesperson for the refinery's owner told S&P Global Commodity Insights on May 10.

Production is up from 205,000 b/d as of April 30. CDU 3 is expected to be ready by the end of 2023, bringing production to full capacity of 615,000 b/d, Kuwait Integrated Petroleum Industries Co., or KIPIC, spokesperson Abdullah al-Ajmi said.

Al-Zour is among several new refineries in the works or starting up in the Middle East. Saudi Aramco's Jazan refinery started in 2021 with a capacity of 400,000 b/d, Oman's Duqm refinery is set to start this year with a capacity of 230,000 b/d and Iraq's Kerbala refinery is also expected to begin operation in 2023 with a capacity of 140,000 b/d.

The supplies have already affected nearby ports. A 665,210-barrel cargo, or 104,758 mt, of low sulfur fuel oil originating from Al-Zour was discharged at the Fujairah port on the UAE's east coast on May 3, the highest LSFO volume from Al-Zour to Fujairah on record, according to the Kpler shipping data. Heavy distillates used as fuel oil for power generation and as ship fuel in Fujairah rose 19% in the week ended May 8 to 11.814 million barrels, the highest since Feb. 27, according to port data shared exclusively with S&P Global.

Bunker demand

Fuel oil supplies have overwhelmed bunker demand in Fujairah lately, local traders said.

The Platts assessed Fujairah-delivered marine fuel 0.5% sulfur bunker premium over the benchmark FOB Singapore marine fuel 0.5% sulfur cargo fell to an average of $8.56/mt over May 2-9, from $11.34/mt in April, S&P Global data showed.

KIPIC said in April that its CDUs 1 and 2 were offline temporarily due to a technical problem. The second CDU had only started up operation in early March. Ajmi said the technical issue was simply "typical challenges associated with plant commissioning."

The CDU 3 planned startup by the year's end is a "more cautious prediction" than earlier plans for it to be operating by around July, Ajmi said.

Al-Zour comprises three same-capacity CDUs. It began exporting naphtha, jet fuel and low sulfur fuel oil in November, after the first CDU was commissioned.

The increased production has also allowed Kuwait to take advantage of home-grown output. The country's Ministry of Electricity, Water and Renewable Energy received its first LSFO shipment from Al-Zour on May 8 for domestic electricity, "a major environmental and energy supply milestone," Ajmi said. The LSFO is for the Al-Zour South power plant and is subject to the rest of the country's power stations receiving LSFO sequentially, official state-news agency Kuna reported on May 9.

KIPIC is a subsidiary of Kuwait Petroleum Corp., the state-owned energy conglomerate which also runs Kuwait Oil Co., Kuwait National Petroleum Co., Petrochemicals Industry Co. and Kuwait Oil Tanker Co.