Challenges in Refining Sector for
Sustainable Future
Rasha Al-Subaie
Team Leader- Strategic Planning
Kuwait National Petroleum Company

27th January 2022

Contents▪

Kuwait▪

KPC & Subsidiaries▪

KNPC Core business▪

Challenges in Refining Sector for Sustainable Future

27th January 2022

Corporate Planning‫شركة البرتول الوطنية الكويتية‬

KNPC

1

State of Kuwait❖ Capital: Kuwait city
❖ Kuwait Prince (Emir) : HH Sheikh Nawaf Al-Ahmad Al-Sabah❖ Kuwait Crown Prince : HH Mishal Al-Ahmad Al-Jaber Al-Sabah❖ Kuwait located in middle east , bordering the Arabian Gulf between Iraq andSaudi Arabia.
❖ Population : 4.63 Million.
❖ Independence :19/06/1961 from UK❖ Economy: Kuwait has open economy with crude oil reserves of about 102 billion
barrels more than 6.5% of world reserves.(~3 millions BBL/day) (Refinedpetroleum product (800,000 BBL/day) in KNPC).

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Corporate Planning

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KPC & Subsidiaries

Kuwait Petroleum Corporation
KPC was first established in 1980 as a corporation of economic character, run on a commercial basis andfully owned by the state.
The objective of KPC establishment was to bring together all state-owned elements of the Kuwait oil
sector under one corporate umbrella.

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Corporate Planning

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KPC & Subsidiaries
KPC Subsidiaries
Domestic

KuwaitKuwait Oil Company
Kuwait National Petroleum Company
Kuwait Integrated Petroleum
Industries CompanyInternational

Petrochemical Industries Company
Kuwait Foreign Petroleum Exploration Company

Kuwait Oil Tanker Company

Kuwait Petroleum International

Kuwait Gulf Oil Company

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Corporate Planning

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KNPC Core Business❖MINA
ABDULLAH
REFINERY

Refining & Local Marketing arm of KPC❖Established in 1960, focused on Marketing initially❖

Operates integrated two complex Refineries, as a Profit centre❖

Refining capacity : 800,000 BPD❖Manages and Operates five Marine Export facilities❖Operates Temporary LNG Import Facilities since 2009❖

KAFCO (Kuwait Aviation) merged with KNPC in Feb2017❖Over 6,250 employees

454 KBPD

MINA ALAHMADILPG / GAS
PLANT
Total 3580 MMSCFD
3 Trains x 560 (1)MMSCFD
2 Trains x 950(1)MMSCFD
2 AGRPs

REFINERY
346 KBPD

LOCAL

MARKETING
61 Petrol FillingStations
2 Depots Sabhan &Ahmadi

KAFCO
KuwaitAviation
Fueling(1) Includes Condensate processing capacity also.

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Corporate Planning5mb/d2024
2023
2022

mb/d

➢ Long-term (2021–2045) capacity additions are expected at 14mb/d, mostly in developing countries. However, the Reference
Case projects a significant slowdown in the rate of additions. Africa
and Other Asia-Pacific are the regions where significant
incremental capacities are expected even after 2030. At the globallevel, around 6–7 mb/d of refinery closures will be required beyond
2026 and to 2045 in order to maintain Refinery utilization rate at80%.

14

Other AsiaPacific

China

Distillation Capacity Additions & Oil Demand Growth, 2020–2045

1816Middle
EastRussia &Caspian

Europe2021Africa➢ In the medium-term (2021–2026), around 6.9 mb/d of new refining
capacity is projected to come online, mostly in the Middle East,Asia-Pacific and Africa. Potential medium-term refining capacity isaround 4.5 mb/d higher than incremental required refining capacity.
However, projected closures should help to offset this imbalance by2026. The Reference Case estimates closures of 4.5 mb/d
between 2020 and 2026, mostly in the US & Canada (1.1 mb/d),Europe (1.4 mb/d) and the Asia-Pacific (1.8 mb/d).

2025

Latin
America➢ Refined Product demand growth lower than Net Capacity Additions.

Source: OPEC World oil Outlook 2021

2026

US & Canada

Challenges in Refining Sector for Sustainable Future

2.0
1.8
1.6
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0

Distillation Capacity Additions & Oil Demand Growth, 2021–2026

Source: OPEC World oil Outlook 2021

Capacity additions per period
Cumulative capacity additionsCumulative oil demand growth121086420
2020-2025

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Corporate Planning2025-2030

2030-2035

2035-2040

2040-2045

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Global EV stock by mode and scenario, 2020-2030
Source: IEA Global EV outlook 2021

Challenges in Refining Sector for Sustainable Future➢ Penetration of Electric Vehicles for sustainable development leads
to lower demand growth of transport fuels and therefore impacts
Refining business.
➢ In the Stated Policies Scenario, the global EV stock across alltransport modes (excluding two/three-wheelers) expands fromover 11 million in 2020 to almost 145 million vehicles by 2030, anannual average growth rate of nearly 30%. In this scenario, EVs
account for about 7% of the road vehicle fleet by 2030. EV sales
reach almost 15 million in 2025 and over 25 million vehicles in
2030, representing respectively 10% and 15% of all road vehicle
sales.

PLDVs = passenger light-duty vehicles; BEV = battery electric vehicle; LCVs = light-commercial vehicles; PHEV = plug-in
hybrid electric vehicle. The figure does not include electric two/three-wheelers.

Global EV sales by scenario, 2020- 2030

Source: IEA Global EV outlook 2021

➢ In the Sustainable Development Scenario, the global EV stock
reaches almost 70 million vehicles in 2025 and 230 millionvehicles in 2030 (excluding two/three-wheelers). EV stock sharein 2030 reaches 12%.

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PHEV = plug-in hybrid electric vehicle. EV sales share = share of Evs (BEV+PHEV) out of total vehicles sales. PHEV share in
EVs = share of PHEV sales out of EV (BEV+PHEV) sales

7Challenges in Refining Sector for Sustainable Future
SHORT – MIDTERM➢

Due to COVID-19, Refinery Profitability dampened due to need to operate at lower utilization rates mainly due to lowerdemand.

➢Crude prices have recovered with production cuts but Crack Margins still remains weak.

➢Gasoline Demand is recovering but likely to stay below pre COVID-19 Levels.

➢Jet Fuel Demand likely to lag in terms of recovery as air travel to come back slowly.

➢Lower economic activity having impact on Diesel Demand as well.

➢The COVID-19 impact is likely to accelerate the capacity rationalization, with some operators already announcing
closures. This overcapacity will cause a period of very low margins in the Midterm and therefore likely to cause acontinuation of capacity rationalization.

➢Refineries with lower complexity and lacking scale/size will be under pressure and run risk of closure.

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Challenges in Refining Sector for Sustainable Future
LONGTERM➢Refining Margins likely to improve beyond 2025 with moderate increase in demand. However, some rebalancing willcontinue this decade due to excess capacity expected with Europe particularly vulnerable to rebalancing.

➢Demand Growth is likely to less as compared to past due to structural changes that includes the penetration of ElectricVehicles and Alternative Fuels for sustainable development.

➢Push for cleaner fuels will continue – it is unlikely to be an opportunity now for higher profit but for being in business.
Delay in costly decarbonization initiatives due to constraints on public finances may help to some extent.

➢Longer term, refining capacity will be needed mainly in East of Suez. Future of refining will be in large integratedcomplex with use of technologies like crude to chemicals (CoC). Hydrocrackers and FCCs will increasingly focus onproviding petrochemical feed stocks rather than fuels.

➢Product exports are likely to be more competitive.

➢IOCs reducing their refining capacity (shift to Energy Companies) will help NOCs. Middle East and Asia expected to beRefining centers with about 50% of global Refining capacity utilization in 2040.

➢Beyond 2035, paradigm shift is expected with reduction in petroleum products (except Naphtha & Jet Fuel) demand.
Oil Demand likely to peak between 2035 to 2040.

➢Challenges to improve the Refineries reliability and productivity will continue.

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