Kuwait Petroleum Corp (KPC) is in talks with Indonesia's Pertamina to build an at least 200,000 barrels-per-day refinery in the Southeast Asian country as it aims to lock in buyers for its future oil supply, KPC's international marketing head said.
A global supply glut following a gusher of shale oil from the United States has redrawn crude trade flows, pushing excess Latin American and West African cargoes to Asia and forcing Opec members to redraft their strategy to maintain their share of a market that has traditionally been their stronghold.
"At the end of the day we have the strategy for disbursal of our crude. We prefer to go into long-term contracts. When we say long term it is 10 years and above," said KPC's Nabil M. Bourisly. A stake in the planned refinery will give KPC a stable outlet for its crude for 20-25 years, he added.
Although details on the size and investment for the refinery are yet to be worked out, Bourisly said the plant will at least be of 200,000 barrels-per-day (bpd) capacity in order to be an "economical project".
The talks for a refinery in Indonesia come on the heels of an agreement between KPC and Pertamina to boost cooperation in the energy space.
Indonesia, which is set to rejoin the Organization of the Petroleum Exporting Countries (Opec) in December after a seven-year break, wants to build complex refineries to meet local fuel demand and cut imports.
The KPC-Pertamina project will however "need at least 5 years" to be commissioned, Bourisly said. KPC is already building a 200,000-bpd refinery and petrochemical project in Vietnam, which will be commissioned in early 2017, he added.
KPC aims to raise its production to 4 mbpd by 2020 from the current 2.95 mbpd and is confident that there will be ample demand for its oil. It exports about 2-2.1 mbpd oil with 80 per cent of that going to Asia, Bourisly said.
"Challenges are always there. We as a supplier have to deal with these challenges regardless of who is in and who is out," he said, when asked if Iranian exports will hit his firm's market share.
Iran has cut the quarterly price for its flagship crude to a three-year low to lure Asian buyers and regain market share lost since US and European sanctions aimed at its nuclear programme cut its crude oil exports by more than half.