December 5, 2021 oil and gas

Kuwait's MEW, KPC ink deal for fuel to power stations


KUWAIT CITY - At a time when several regulatory authorities are calling for necessary amendments to the agreement concluded between the Ministry of Electricity and Water (MEW) and the Kuwait Petroleum Corporation (KPC) for the supply of fuel to electrical power stations, the State Treasury has incurred about KD 5 billion, which was paid to KPC for the supply of fuel to the power stations in the last four fiscal years, reports Al-Anba daily.

According to informed oil sources, KPC had signed an agreement in 2015 with MEW to regulate the current deal for supplying power stations with fuel, provided that it will be implemented until 2035. The deal was based on fueling power stations as per the international price. The amount of fuel supplied to the stations was not fixed due to its dependence on the consumption of electricity and water, which is subject to rise and fall. The annual average fuel consumption in the power stations is about KD 1.5 billion. It is increasing annually in accordance with urban expansion and rising temperatures, which increase the electricity consumption.

Regarding the reasons for amending the agreement, the sources explained that the regulatory authorities believe the agreement concluded between KPC and MEW placed restrictions to the interest of KPC, which led to unjustified financial burdens on the State Treasury. The agreement includes in the total cost of fuel the cost of the infrastructure established by KPC and the related operation, transportation and maintenance to supply MEW with fuel. This means the selling price for MEW includes the costs of infrastructure, operation, transportation and maintenance.

The charge for the diesel, whether it is local or imported, is carried out according to an equivalent price, with the addition of a profit margin to compensate for the decrease in the investment return of the Al-Zour refinery. The calculation is based on the amount of fuel supplied to the ministry. It is allowed to lose 0.2 percent of it during delivery at full price, without reference to KPC’s compensation for this lost quantity in the next batch of fuels. MEW wants to charge its budget with those costs. The ministry burned more gas in its stations instead of diesel as a result of KPC changing the quantities agreed to be supplied, which increased the bill for purchasing fuels. However, MEW has a different point of view, as it considers this agreement to be formal and organizational.

Zawya



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