As the Sultanate joins brotherly Arab states and the wider international community in mourning the passing of Kuwait’s beloved leader, Shaikh Sabah Al Ahmad al Sabah, the Observer looks at the role of the State of Kuwait to Oman’s in furthering economic development under the leadership of the late Emir. This contribution, exemplified by, among other things, Kuwait’s partnership with Oman in the development of a mega refining and petrochemicals complex at Duqm in the southeast of the country, promises to be momentous and long-term in its positive impact to the Omani economy.
Indeed, Oman’s bilateral relationship with fellow GCC member state Kuwait has included a strong economic and commercial component as well, encompassing the energy sector, iron and steel production, renewables, foodstuff, real estate and developmental assistance, among other areas.
But it’s Kuwait’s participation as a joint venture partner in an integrated refining and petrochemicals complex currently under development at the Special Economic Zone (SEZ) in Duqm is the defining element in Oman-Kuwait economic relations. Wholly state-owned Kuwait Petroleum International Limited, which is the downstream international arm of global energy conglomerate Kuwait Petroleum Corporation (KPC), is a 50 per cent partner in Duqm Refinery & Petroleum Industries Company LLC (DRPIC) — the JV behind the mega venture at Duqm. Its Omani counterpart is OQ, the wholly Omani government-owned energy group (formerly known as Oman Oil & Orpic Group).
DRPIC is making excellent headway in the delivery of a grassroots refinery with an investment of around RO 7 billion. The 230,000 barrels per day (bpd) capacity refinery will process various types of crudes, including substantial volumes of Kuwaiti crude, into diesel, jet fuel, naphtha and liquefied petroleum gas (LPG). Linkages with a Liquid Berth at the nearby port and a world-scale Crude Oil Storage Terminal at Ras Markaz, some 80 kilometres south, ensure that the refinery investment is anything but modest.
Indeed, the two joint venture partners have been pushing ahead with the addition of an even larger petrochemical complex downstream of the refinery. Total investment in the petrochemicals complex, featuring an array of units that seek to maximise value generation from crude and other feedstocks flowing downstream from Duqm Refinery as well as other sources, is estimated at over $10 billion.
FEED work for the giant petrochemicals complex is being undertaken by UK-based international energy services specialist Wood Group. The FEED package covers not only the Natural Gas Liquids (NGL) extraction facility, to be located in Central Oman, but also a 230 km pipeline connecting the facility with Duqm. The centerpiece of the complex in Duqm is a giant mixed-feed 1.6 million tonnes per annum (TPA) capacity Steam Cracker that will process select product streams from Duqm Refinery, as well as Liquefied Petroleum Gas (LPG), Full Range Naphtha (FRN), off gases and Natural Gas Liquids (NGL) extracted from natural gas available in Central Oman.
Significantly, the complex plans to produce a string of new products for the first time in Oman, notably Ethylene Glycols, Oxo Chemicals and Butadiene, thereby adding to the portfolio of petrochemicals already produced in the Sultanate. New grades of polyethylene and polypropylene proposed to be produced at the Duqm complex will also complement the existing product portfolio. Additionally, these product streams will serve as feedstock for value-adding downstream investments, thus driving the growth of a vibrant chemicals and petrochemicals-based industry in Duqm and beyond.
As the single biggest energy-related investment in the Sultanate, the refinery and petrochemicals project will undoubtedly fuel the country’s long-term economic development, according to market pundits.
Better known by its trademark Q8, Kuwait Petroleum International’s joint venture partnership in the Duqm venture has contributed to a significant uptick in Kuwait FDI into the Sultanate. It surpassed $1 billion in 2017 and has continued to climb in recent years, soaring to $2.2 billion by the third quarter of 2019, according to official figures.
Other Kuwait-based institutions too have been investing in key areas of Oman’s economy over the past decade. Notable is the example of the Gulf Investment Corporation (GIC), an investment company owned equally by the governments of the six member states of the GCC, including Oman. GIC, which was incorporated in the State of Kuwait as a Gulf Shareholding Company in 1983, has been fostering economic growth, economic diversification and capital markets development across the Gulf region, including Oman.
Over the past decade, GIC has invested in a number of strategically important ventures across the renewables, iron and steel, and food sectors. It has a 25 per cent stake in Moon Iron & Steel Company (MISCO), which recently brought into operation a 1.2 million tonnes capacity steel complex with billet and rebar manufacturing facility at Suhar Industrial City. Kuwait-based GIC is also a 14.2 per cent investor in TMK Gulf International Pipe Industry, a Suhar based plant that manufacturers high pressure steel line pipes and casing pipes for the Oil & Gas sector.
In the food sector, GIC owns a 20 per cent interest in A’Saffa Foods, which is currently the largest fully integrated poultry company in the Sultanate. More recently, it acquired a 26.68 per cent stake in Osool Poultry, which is nearing completion at Haima in central Oman. When operational later this year, the facility will supply boiler farms in Oman and the wider region with fertilised/hatching eggs.
But GIC’s signature investment is in Oman’s biggest solar PV based Independent Power Project (IPP), which is set to come into operation at Ibri during 2021. GIC owns 40 per cent of Shams Ad-Dhahira Generating Company, which is developing the 500 MW scheme with ACWA Power as the main developer. The project is being developed on a Build-Own-Operate basis under a 15-year offtake agreement with Oman’s sole power procurer.
Another key institution that has played a substantive role in Oman’s infrastructure development is the Kuwait-based Arab Fund for Economic and Social Development (AFESD). A pan-Arab development finance institution, the Fund’s funding support for Oman’s infrastructure and public sector projects totaled over 800 million Kuwaiti dinars as of December 31, 2019. This vital source of financing assistance has helped the Sultanate execute important infrastructure schemes spanning road transport, water and wastewater services, and utilities, among other sectors. Oman was also among the biggest beneficiaries, among the Arab states, of funding assistance disbursed by the Kuwait-based fund in 2020.
Beyond Kuwaiti public sector institutions, a number of private Kuwaiti businesses have also either directly or in partnership with Omani players invested in key sectors that have benefited the domestic economy. Target sectors have included real estate, tourism, and education and healthcare services. Majority Omani government-owned Omantel, the nation’s biggest telecom operator, has also made a significant investment in Kuwait’s telecom operator, Mobile Telecommunications Company (Zain), which underscores the strength of bilateral ties enjoyed by the two brotherly countries.