‘Importing gasoline cheaper than production’
KUWAIT CITY, April 12: Social media for the past two weeks is full of debate on the recent decision by Kuwait Petroleum Corporation (KPC) to shut down Shuaiba Refinery on April 1, contrary to idea that the refinery is of significance, after it became a burden on oil sector without its economic essence, reports Al-Nahar daily.
Chief Executive Officer of KPC Mohammad Ghazi Al-Mutairi hinted the refinery incurred up to $890 million in losses over the past five years. He explained the losses were in accumulated costs of production, citing shattered fuel byproducts with high concentration of sulfur. He noted the cost of importing gasoline is cheaper than producing it locally.
He pointed to nine facts hidden from critics of the decision to shut down the refinery and said it entails comprehensive plan to ensure the local production complements the local market needs. Mina Al-Ahmadi Refinery will continue to guarantee sufficient production of local needs of benzene, he said, indicating there will not be any shortfall in benzene production, because Mina Ahmadi and Mina Abdullah refineries will cater for fuel supply to the Ministry of Electricity and Water without any need for import.
Other aspects of the facts indicate the cost of gasoline production at Shuaiba Refinery is relatively higher than the cost of importation from the international market due to its low production capacity level. Facilities for storage and export at Shuaiba Refinery will play active role in the environmental fuel production after its connection with Mina Ahmadi and Mina Abdullah refineries respectively. The real reason for rejecting proposals to upgrade the refinery is purely economic and commercial as established by studies upon which a decision was made to build the fourth economic viable refinery.
The last two points indicate the decision to shut down the refinery was taken after comparing the operational costs with sales made by the refinery throughout fiscal year 2016/2017 until February 2017, as the refinery could not cover the cost of production and incurred $70 million in losses with a dollar lost per barrel of oil refined there.