The highly advanced Al- Zour Refinery in Kuwait is currently operating below its peak capacity of 615,000 barrels per day, with its current output standing at 440,000 barrels per day. This marks a decrease of 175,000 barrels per day from its previous full-capacity operation just a few months ago. The main cause of the abrupt decrease remains uncertain. One potential factor could be attributed to the decision of the Ministry of Water and Electricity and Water to abstain from procuring 30 percent of its fuel, initially designated for electricity generation within the state. Instead, the ministry appears to favor imported gas, leading to significant losses for both Al-Zour and Kuwait Petroleum Corporation (KPC).

This trend of losses may persist unless there’s an investment in new units or extensive upgrades. Alternatively, the shortfall of crude oil may also impede the operation of our refineries both domestically and internationally. We currently produce 2.41 million barrels of crude oil daily, within a range of 2.75 million barrels per day. This figure reflects two voluntary reductions: 135 in 2024 and 128 in the previous year, totaling 263,000 barrels per day.

This prompts us to question the necessity of such voluntary cutbacks and the reasons behind our agreement to them. While we acknowledge the OPEC+’s resolution, we must consider whether we are obliged to reduce our crude oil production, potentially harming our industry and risking market share and customer base. This concern is particularly significant as Kuwait endeavors to expand Al-Zour’s refining capacity to over 800,000 barrels per day by 2026.

Undoubtedly, another solution to maintain the refinery at full capacity is to offer it to third parties for processing their crudes at Al-Zour. This could extend to nearby countries facing a shortage of refining capacity in the Arabian Gulf region. Given that the refinery is designed to process heavy crude oils abundant in our region, it presents a potential opportunity for countries outside the region lacking refineries or experiencing capacity shortages. Additionally, oil companies with crude oils seeking to convert them into finished products could benefit from refining margins as opposed to solely selling crude oil. It appears imperative for Kuwait to enhance its crude oil production to fully utilize both existing and future refining capacities, ensuring that we do not fall short of meeting our refining tential.

KPC cannot afford to take double hits simultaneously, especially after investing billions of US dollars for constructing the most advanced refinery, only to end up with closing more than 30 percent of its capacity, and with Al-Zour running at 70 percent of its capacity. Have we considered buying foreign crude oils instead of idling one of the most advanced refineries in the world? Alternatively, it might be more prudent not to propose any voluntary cuts to OPEC+ given our current constraints in boosting crude oil production, especially when other members are not adhering to their agreed upon production levels. At this point, a straightforward request seems reasonable.

By Kamel Al-Harami
Independent Oil Analyst
Email: [email protected]