Saudi Arabia and Kuwait have struck a deal over the site of a planned oil refinery near their common border, a Kuwaiti newspaper reported on Thursday. The deal was reached during talks in Riyadh a few days ago, Al-Rai reported, quoting unnamed high-ranking industry sources. Kuwait's Emir Sheikh Sabah Al-Ahmad Al-Sabah held talks with Custodian of the Two Holy Mosques King Abdullah on Saturday during a short visit to the Kingdom. Saudi Texaco, which manages oil on behalf of Saudi Arabia in the divided zone shared with Kuwait, was reported to have objected to the location of Kuwait's new refinery in an area known Al-Zour, which is close to the border. The paper also quoted the sources as saying that Kuwait has raised the estimated cost of the 615,000 barrels per day (bpd) refinery to $19 billion from $15 billion, due to an increase in global prices. When the Gulf state began planning for the project several years ago, it had earmarked only $6.3 billion. However, bids by international companies came at more than $15 billion, prompting Kuwait to cancel the tender and invite new bids on the basis of cost-plus profit margin. Faruq Al-Zanki, head of the state-owned refiner Kuwait National Petroleum Co, told the Middle East Economic Survey last month that one of the contracts was awarded to US engineering firm Fluor. Other contracts are expected to be awarded later this month, he said. Kuwait in September prequalified 17 international companies to bid for the refinery. Construction is due to start later this year or early in 2009, with the refinery set to come on stream by the end of the first quarter of 2012. Completion was originally planned for 2010. The new refinery, along with another project to upgrade two of Kuwait's three existing refineries, would boost the emirate's refining capacity to 1.4 million barrels per day (bpd) by 2012, up from its current 936,000 bpd. Kuwait sits on about 10 percent of global crude reserves and pumps around 2.5 million bpd. State-owned Kuwait Petroleum Corp (KPC) will work to raise the approved budget for the plant to $19 billion from $14 billion, said Rai, citing industry sources. The Gulf neighbors agreed to shift the planned location of the refinery “a few meters”, added the newspaper. Saudi Arabian Chevron has a lease on some of the land on Kuwait's side of the neutal zone, which Kuwait state refining arm KNPC had earmarked for the new refinery. Chevron, operator on the Saudi side of the zone, is not using the land but may want to if it expands operations in the zone. Chevron is in talks with Saudi Arabia about renewing its concession in the zone. The concession expires in 2009. KNPC officials could not immediately be reached for comment on Thursday. Kuwait, the world's seventh-largest oil exporter, sits on around one tenth of global oil reserves. __
