OREANDA-NEWS. April 23, 2012. Kuwait's joint venture refining and petrochemicals projects in China and Indonesia are set for start-up in 2015 and 2017 respectively, the president of state-owned Kuwait Petroleum International said.

A final investment decision on a similar project in Vietnam is within striking distance, he said.

Speaking at the Gulf Petroleum Conference in Kuwait City, Hussain Esmail put the total capital cost of the Chinese project, a joint venture between KPI's parent Kuwait Petroleum Corp. and Sinopec, at USD9.5 billion.

The refinery would have a total oil-processing capacity of 300,000 b/d and fuel-production capacity of 10 million mt/year, with output consisting mainly of gasoline, diesel and jet fuels, he said. The integrated petrochemicals complex would produce mainly ethylene with an output capacity of 1 million mt/year.

KPI and its sister entity Kuwait Petrochemicals Company together manage Kuwait Petroleum's 50% stake in the project, which received final approval from Beijing in March 2011. That holding will fall to 30% if France's Total elects to join the venture with a 20% stake.

Esmail said Kuwait Petroleum was only the second foreign company, after Saudi Aramco, to win Beijing's approval for a refining venture in China.

The proposed 200,000-300,000 b/d refining and chemicals complex in Indonesia was still at the planning stage, Esmail said. The existing project partners, Kuwait Petroleum and Pertamina, were in the process of selecting an international partner for the development, he said.

As Kuwait pursues downstream petroleum expansion in Asia, its strategy is to develop only integrated projects that include petrochemicals and marketing components in addition to oil refining, but negotiating such deals was complex so that project progress often seemed slow, Esmail said.

"Integration is sacred for us. We will not break that value chain," he told the conference.

"Pure refining has proved unsustainable in the long term," he said. KPI also has a 35% stake in a consortium to develop a 200,000 b/d refining and chemicals complex in Vietnam at a total estimated capital cost of USD 5.2 billion. The other partners are Japan's Iditsu (35.1%) and Mitsui (4.7%), and PetroVietnam (25.1%).

A site 45 km (28 miles) south of Hanoi has been prepared for the project, which is designed to have fuel output capacity of 48,000 b/d of gasoline, 72,000 b/d of diesel and 10,000 b/d of kerosene, as well as 1.2 million mt/year of combined aromatics output capacity, consisting mainly of benzene, paraxylene and polypropylene, Esmail said.

The preferred engineering, procurement and construction consortium for the project had been picked; external financing was being finalized, he continued.

"The financing plan is close to conclusion. After that, the final investment decision will be announced," Esmail said.

KPI, the downstream petroleum foreign investment arm of Kuwait Petroleum, has switched its geographic focus to Asia from Europe since 2006, although it plans to continue investing in its existing European assets to improve their efficiency, Esmail said.

Under a "benign" economic scenario, he predicted European demand for oil products would decline by 1% a year in coming years, strong demand growth expected in Asian markets, led by China and India.

KPI's rationale for maintaining its European presence was that the remaining companies stood to benefit from refinery closures in the region, Esmail said.