China’s win-win formula makes a success out of Kuwait’s refinery project

The Al-Zour New Refinery Project (NRP) in Kuwait is a part of the Belt and Road Initiative (BRI) by China which has started a wave of economic and social development in the region. Under the Belt and Road Initiative, China is actively seeking mutually beneficial cooperation with the countries associated with BRI.

China has previously entered into projects with Sri Lanka, Pakistan, and the Gulf states on the basis of a win-win formula. This is where the participating states receive funding for the projects, and a major economic boost is created by the influx of technology and human capital brought in by the Chinese contractors. In return, China reaps not just the financial and economic benefits but also political benefits — strengthening its foothold in the region.

The Al-Zour New Refinery Project (NRP) is part of the same Belt and Road Initiative. The project recently saw the installation of 15 sets of primary oil refining units. This is one of the key projects under the ”Kuwait Vision 2035”, which initially received an estimated investment of $27 billion. Like other BRI projects, it was built with the joint cooperation of Kuwaiti and foreign contractors.

The oil-rich Gulf countries are going through a transformative phase to liberalize their economies and reduce their dependence on oil exports. Countries such as Kuwait, KSA, UAE, and Qatar are thus opening up their private sectors in order to invite foreign investment to transform the oil-centric rentier economies into trade and financial hubs.

Kuwait Vision 2035 is the underlying vision that is guiding the narrative of the Kuwaiti economy into a regional economic and financial hub over the next 15 years. The vision aims to reduce the dependence on oil exports and increase the product exports of Kuwait.

Under this vision, the NRP is set to become one of the biggest oil refineries of the Middle East and is expected to exponentially increase the oil processing capacity of Kuwait.

The design, construction, procurement and installation phases of the oil refining units were carried out by Sinopec; the China Petrochemical Corporation. During the construction phase, parts were purchased from Malaysia, Egypt and U.A.E among other countries and approximately 19000 workers were employed for the construction of the project, including workers from other countries participating in BRI such as Pakistan, Malaysia, and Vietnam.

The project manager of China Petrochemical Corporation (Sinopec) Luoyang Engineering Co. Ltd, Zheng Li said that the Al Zour New Refinery Project (NRP) will not only benefit Kuwait but also other countries in the region especially those taking part BRI. He also added that this is the first time that the Kuwaiti oil refineries have used Chinese design, the new refineries have been built using some of the most advanced technology available in the market which will increase the efficiency and quality of the output.

In a manner similar to BRI projects in other countries, the total value of the project will be divided into a fixed percentage between the Chinese contractors and local manufacturers, and this is expected to benefit the local Kuwaiti economy in the years to come.

Zheng Li also stated that the project reflects the Chinese concept of mutually beneficial transactions, where both Kuwait and China end up better off as a result of this project. By the end of October 2019, six sets of units constructed by Sinopec were handed over.

This is known as an optimal Nash Equilibrium within Game Theory, an economic model of behavior and payoffs. Often it is a lack of communication that can lead to both parties being worse off, but international policy coordination continues to impress.

NRP has been hailed as ‘One of the biggest projects in the oil industry’ by Osamah Ali al-Atawneh, the representative of Kuwait Integrated Petroleum Industries Company. Atawneh also expressed his delight at the quality and pace of construction and expressed his wish to work with Sinopec in further projects in Kuwait.

The project manager of Wood Kuwait, Christopher Smith, expressed his satisfaction with the quality, speed, and motivation of Chinese workers to finish the project within the defined time frame.

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