quarterly magazine, issue no. 45, july 2008 · ment certificate for the nghi son refinery &...

THE VISION PROJECT: RAISING PERFORMANCE AT KPC & ITS SUBSIDIARIES

MINA ABDULLAH REFINERY WITNESSES IMPROVED STAGES OF DEVELOPMENT

INTERNATIONAL DIESEL SERVICE ENTERS PORTUGESE MARKETS

INFLUENCE OF FINANCIAL DYNAMICS ON OIL PRICES

ABDULLATIF AL-HOUTI:AIM TO ACHIEVE HIGHEST

RETURNS OF WEALTH

Quarterly Magazine, Issue No. 45, July 2008

KPC Mission

Kuwait Petroleum Corporation (KPC), fully owned by the State of Kuwait, is one of the world’s major oil and gas companies. It is focused on petroleum exploration and production, refining, marketing, petrochemical production & sales, and transport. KPC’s mission is to manage and operate these integrated activities worldwide in an efficient and professional manner. In addition, KPC is committed to growing shareholder value, while ensuring the optimum exploitation of Kuwait’s hydrocarbon resources. KPC has an important role in contributing to the development of the Kuwaiti economy, developing a national workforce, maintaining superior commercial and technical expertise, and pro-actively managing the environmental, health, and safety aspects of KPC’s businesses.

Quarterly MagazineIssue No. 45, July 2008

Our common humanity: The basic building block in the Marketing Sector 221814 Financial dynamics:

How it influences oil prices

Environmental Fuel provides a healthy and safe environment

The Vision Project: Targets higher performance at KPC and its subsidiaries 10

In This Issue

Editor-in-Chief

Talal Al-Khalid Al-SabahManaging Director, Governmental,Parliamentary, Public and Media Relations

The KPC World team would like to extend their appreciation to everyone who contributed editorial material, information, and photos for this magazine issue.

CorrespondenceP.O. Box: 2656513126 Safat, KuwaitFax: (965) 4994991Website: www.kpc.com.kwEmail: [email protected]

32 36 The Montreal Protocol and what it means for Kuwait’s environmental challenges

26 Shell Merit Program is a key benchmark in Port Abdullah Refinery history

30 KPC Enterprise Risk Management Project

International Diesel Service flag flies high over Portugal

Design, Layout & Print byAl-Assriya Printing Press Publishing & Dist. Co. w.l.l.

Editorial Team

Media Relations Dept.

Words fail to describe the great loss Kuwait suffered recently, which is the passing of His Highness the Father Amir Sheikh Saad Abdullah Al-Salem Al-Sabah, the man who loved Kuwait to such an extent that he dedicated his entire life to it. Whatever history records about the late Amir, it will not be able to give him his due in full nor be able to describe his profound love for Kuwait.

Regarding recent political and economic activities at the local level, the highest forms of democracy were clearly evident through the latest parliamentary elections and the formation of the new government with its aspirations of future progress for the Kuwaiti people.

At the economic level, several conferences were held recently to support Kuwait's economy. The Third Conference of Oil Investment and Industry was one of the most important conferences which discussed oil investment opportunities in Kuwait and the role of the private sector within it especially Kuwait's plans to invest more than U.S.$55 billion during the next five years for projects that develop Kuwait's oil industry. KPC is working closely with the International Marketing Sector to enhance its global position by strengthening its presence in traditional markets, and at the same time researching promising future markets and entering them aggressively such as China's markets which began importing nearly 140,000 barrels of oil per day from the KPC.

The latest issue of KPC World magazine contains several articles that focus on KPC's role in boosting its position in the global marketplace. The magazine includes an interview with Mr. Abdelatif Al-Houti, Managing Director International Marketing, where he talks about his vision for the International Marketing Sector and the positive steps that have been taken to improve the Sector's performance. The latest issue also includes a meeting with Dr. Hasan Qabazrd, OPEC Director of Research who highlights the factors affecting oil prices as well as an article that outlines KPC's efforts to protect the environment.

Editorial

Talal Al-Khalid Al-SabahManaging Director, Governmental,Parliamentary, Public and Media Relations

Inauguration Ceremony for the Nghi Son Refinery & Petrochemicals in VietnamOn May 10th 2008, the inauguration ceremony took place at the Nghi-Son Site – North Vietnam – Thanh Hoa Province, on the occasion of awarding the Invest-ment Certificate for the Nghi Son Refinery & Petro-chemical Complex to the Members Council of the JV Company by the relevant Authorities.

The project to be executed by a joint venture company that was established especially for this purpose, includes Kuwait Petroleum International (KPI), PetroVietnam Company, Idemitsu Kosan Co., Ltd. (IKC), and Mitsui Chemicals Inc. (MCI)

For the importance of the project to the Vietnamese economy, the ceremony was attended by the Minister of Industry and Trade, the Secretary of Party Thanh Hoa Province, and other honorable members of the Vietnam-ese Government; high ranking representatives of the in-vestors (Kuwait Petroleum International (KPI), Vietnam Oil and Gas Group (PVN),Idemitsu Kosan Co., Ltd. (IKC), and Mitsui Chemicals Inc. (MCI)); the JV Co. Members Council (MC); the JV Co. and representatives of the Management of the JV Company.

During the ceremony, Mr. Mohammad Rashed Jasem of KPI, Chairman of the Members Council, expressed his and the partners happiness for working together with the Vietnamese government, praising the great efforts and commitment exerted by all parties involved in the project, that culminated in the successful inauguration ceremony.

In his speech, Mr. Jasem outlined briefly the Vision, Mission and Strategies of the JV Company, as well as the Values and Ethics, which will be adopted by the JV Company.

Mr. Mohammad Rashed Jasem of KPI, Chairman of the Members Council is receiving the investment certificate from the representatives of the Vietnamese government

Project Location

Mr. Yasunori Maeda, Deputy Chairman of the Members Council and representative of IKC, stated that “During this period we have built a solid sentiment of mutual re-spect among all Parties involved in the project and a trust in each other efforts and contributions, to indicate the profound sentiment of mutual respect which exists cur-rently among all parties involved in the project.”

Ms. Tran Thi Binh and Mr. Yukio Hara, members of the Members Council respectively for PVN and MCI, praised the Vietnamese Government for the support granted to the project and confirmed their continued commitment and that of their companies for the success of the JV, for the mutual benefit of all partners and of their respective countries.

Overview of the Joint Venture1. Company Name: Nghi Son Refinery &

Petrochemical Limited Liability Company

2. Refining Capacity: 200,000 bbl/day (equivalent to 10 million tons/year)

3. Location: Nghi Son Economic Zone, Thanh Hóa Province, Socialist Republic of Vietnam

4. Established: To be established soon after all formalities will be completed

5. Total Investment Costs: Approximately USD 6 billion

6. Debt-to-equity ratio: Targeted at 70:30%

7. Initial Paid-in Capital: USD 200 million

8. Investment Ratio: PVN 25.1%, KPI (through its affiliate KPE) 35.1%, IKC 35.1%, MCI 4.7%

Issue No. 45 - July 2008 5

A free dignified life for everyone was his main concern

Meeting citizens and solving their issues was

one of his priorities

National unity was a central and important aspect of his ideology

about work and leadership

Historiansconsiderhim to beone of themost importantKuwaitiPoliticians

Issue No. 45 - July 20086

It was no ordinary day in Kuwait. Despite the intense heat of the day, thousands of deeply mournful Kuwaitis with tears streaming down their faces left their homes to participate in the last farewell to a unique leader—he was a national symbol of loyalty, dedication and sacrifice. An official ceremony accompanied His Highness the late Father Amir Sheikh Saad Al-Abdullah Al-Salem Al-Sabah to his final resting place leaving behind a deep heartache and sense of loss.

After a long struggle with illness, the Father Amir passed away on May 13 2008 at 78 years of age. With his death, Kuwait lost a good and noble son who witnessed its first moments of independence and the beginning of a modern State of Kuwait.

His LifeHis Highness received his education at Mubarakiya School. He completed secondary school then travelled to Great Britain, joining Handan Mili-tary College in 1951 on a scholarship. After his return in 1954, His High-ness was appointed Deputy of the Police Department and remained in that position until 1959. During this period, Kuwait stood on the verge of independence and Kuwait’s politi-cal leadership decided to reorganize the government apparatus. An Amiri decree was issued appointing him as Head of the Police and Public Secu-rity after its merger in 1961. He was selected to be the first Minister of the Interior in 1962, Then in his era as a Crown Prince the Kuwait Police Col-lege was established in 1956 and by Amiri decree. The Father Amir left an unmistakable mark on legislation, laws regarding citizenship & residency, and illegal immigration into the country.

His Highness was one of Kuwait’s most prominent leaders not because he occupied the most important posts in the country but rather because of his ideas about the State of Kuwait and issues surrounding continuity, advancement, and stability. His pa-triotism was obvious in his efforts in

EULOGYThe late beloved Sheikh Saad Al-Abdullah Al-Sabah

“When great men die we recognize their greatness in life, but even in death, they cannot be extracted from our hearts. They remain, illuminating peo-ple's lives, even after their passing. His Highness Sheikh Saad is one of these kinds of men who will remain an enduring symbol, not only, for those now living, but also, for future generations to come.”

Amiri Diwan of the State of Kuwait ✧ ✧ ✧ ✧ ✧ ✧

“Words fail to describe how Kuwaiti people felt and the scenes of sorrow when they first heard the news of his passing—this demonstrates the love of all segments of Kuwaiti people for the late ‘father’ Amir Sheikh Saad Al-Abdullah Al-Sabah, whom we are going to miss.”

Sheikh Nasser Sabah Al-Ahmed - Minister of Amiri Diwan ✧ ✧ ✧ ✧ ✧ ✧

“Words fail to eulogize the Father Amir Sheikh Saad Al-Abdullah Al-Salem Al-Sabah who stood tall through his attitudes and patriotism, God rest his soul in paradise.”

Eng. Mohammad Abdullah Al-Ulaim - Minister of Oil ✧ ✧ ✧ ✧ ✧ ✧

“Kuwait has lost a father and leader, who played a big role in protecting Ku-wait and returning its sovereignty and stability; he built the Kuwaiti home-land together with the late Amir Sheikh Jaber Al-Ahmed, and the current Amir His Highness Sheikh Sabah Al-Ahmed.”

Sheikh Ahmad Al-Fahad - Head of the National Security Apparatus ✧ ✧ ✧ ✧ ✧ ✧

“The achievements of the late ‘father’ Amir demonstrated his sacrifice and patriotism, and his heroic attitudes were clear during the Iraqi occupation. He spared no effort in order to reunite Kuwaitis, support the return to legitimacy, and to reconstruct Kuwait after the destruction caused by the Iraqi occupation.”

Jassem Muhammad Al-Kharafi - Speaker of National Assembly✧ ✧ ✧ ✧ ✧ ✧

“The soil of Kuwait itself is crying out for the departure of the champion, who protected it in every field to uphold this country.”

Faisal El-Hajji - Deputy Primer, Minister of State for Cabinet Affairs✧ ✧ ✧ ✧ ✧ ✧

“Words can't be greater than achievements of this great man: his achieve-ments lie beyond the limits of description.”

Dr. Suad Al-Sabah - Kuwaiti poet

facing the Iraqi invasion to Kuwait on August 2, 1990.

He aimed to strengthen avenues of cooperation in political, economic, cultural and social areas.

From 1978-2003, His Highness headed 11 governments wherein he was able to upgrade social and eco-nomic developments, and to provide Kuwaitis with access to similar situa-tions to more developed countries. In addition to this, successive govern-ments paid attention to security issues

as well as youth and Islamic affairs be-sides ensuring agricultural security and environmental protection.

During his era, all police and security departments were developed accord-ing to the latest technology. In ad-dition, His Highness contributed to housing and citizenship legislation, job and social security, modernization of public utility and services in all ar-eas. He devoted his attention to cul-tural affairs, and supported scientific research.


Construction Bids for KNPC’s Fourth Refinery AnnouncedThe Kuwait National Petro-leum Company (KNPC) has announced the results of con-struction bids for its fourth refinery submitted on 26 De-cember, 2007 following the best international technical and commercial criteria. The new refinery will produce low sulfur fuel oil for Kuwait’s increasing power generation requirements for electricity. An alliance of JGC (Japan) and GS (South Korea) has been awarded Package 1 to build the main manufactur-ing units: the contract value is estimated at US$4 billion. SK Engineering and Con-struction has been awarded Package 2 to build support-ive manufacturing units esti-mated at US$206,244,688.Consultants were commis-sioned to assist in these bids. Dalim Industrial (Korea) was awarded Package 4 to build the tank area estimated at US$ 1,184,133,259. Hyundai En-gineering and Construction is also involved with estimates valued at US$ 1,120,614,000. Package 3 was not included among these tenders.

Mr Saad Al-Shuwaib, KPC CEO was a key speaker at the 6th Middle East Refining and Petrochemical Conference and Exhibition (Petrotech 2008) held in Bahrain May 25-28, 2008, under the ban-ner of 'Refining Petrochemi-cal Integration'.

Al-Shuwaib's main address focused on petrochemical re-fining integration to integrate petrochemical and refining complexes with optimal oper-ations and products, benefit-ing from the synergy between refinery and petrochemical plants, which, in turn, will increase margins and reduce overall earning's volatility.

His address also dealt with the security of petrochemical

feedstock supply, the efficient use of energy and optimized asset performance. Besides talking about Middle East economies and the increas-ing industrial activities in the hydrocarbon sector in these countries lead to innovative methods to ensure especially the long-term viability of the hydrocarbon industry, KPC is adopting issues related to environmental and social re-sponsibilities that accompany the growth of the hydrocar-bon sector.

Petrotech 2008 is considered to be one of the most impor-tant conferences specializing in petrochemicals that dis-cusses advanced scientific and strategic challenges.

KPC Actively Participates in Petrotech 2008


KAFCO Signs US Army Contract to Supply Airplane Jet FuelThe Kuwait Aviation Fueling Company (KAFCO) recently signed a contract with the Energy Supply Center based in the Pentagon, Washington D.C. to fuel all U.S. Army planes including commercial, military and cargo planes at Kuwait International Airport and at U.S. military bases in Kuwait. The contract expires in 2010. According to KAFCO sources, this contract will provided added experience by dealing directly with American Army planes.

KPC Negotiates with International Companies to Enhance the Production of Free Gas & Crude Oil Kuwait Petroleum Corpo-ration (KPC) is negotiating with international oil indus-try companies concerning first time technical to achieve its ambitions to raise the pro-duction of oil & gas.

As KPC targeting its oil pro-ductivity from 2.6 million barrels per day (bpd) to 3 mil-lion by 2009, 3.5 million bpd by 2015, and 4 million bpd by 2020, this production target

EQUATE Reaches 11 Million Hour Milestone for SafetyFor the first time in EQUATE’s distinguished history, EQUATE Petro-chemical Company recently has achieved 11 million hours of accident-free work which includes company employ-ees and contractors. Accord-ing to Mr. Hamad Al-Turkeit CEO EOUATE, "11 million hours of safe work without losing one day is considered a great achievement; these results come from the com-mitment of all employees and contractor carefully following the rules and regulations for safety."

worldwide after the USA and China: Japan’s oil purchases are maintained through long-tem contracts direct from oil producing distributors them-selves.

requires technical assistance from IOCs.

KPC is also negotiating part-nership agreements with sev-eral major oil groups for free gas projects; the goal of these partnerships is to raise pro-ductivity from 175 million cu-bic feet per day to 600 million cubic feet per day by 2011.

Kuwait Takes 3rd Place as Major Oil Supplier to JapanAccording to recent reports in April 2008, the State of Ku-wait now occupies third place as a major supplier of crude oil to Japan as exports contin-ue to multiply within recent months to get ahead of Iran and Qatar.

The Japanese Agency for Nat-ural Resources and Energy from the Ministry of Econo-my, Commerce, and Industry records that exports of Kuwaiti crude oil increased by 90.5% in April, 2008 compared to the previous month of March, and 40.4% compared to the same period in 2007.

In April 2008 Kuwait exports reached 10.8% of total imports to Japan compared to 5.5% in March 2008.

Japan continues to be the third major consumer of oil


KPC has prepared an ambitious project called the Vision Project that aims to reach a clear sense of the wider position of the oil sector in the country. The Vision Project also seeks a clear sense of the specific role that the oil sector plays in Kuwait’s economy, reviewing the rules and regulations governing the relationship of KPC with its subsidiaries as well as KPC’s relationship and that of its subsidiaries with community institutions. The driving force behind KPC’s Vision Project is to keep abreast of the current international changes that would support as well as modernize the international reputation that KPC has reached and to further advance all levels of work.

The Vision Project aims to identify the overarching factors that allow KPC and its subsidiaries to continue to be an international corporation especially as it possesses the basic structure and expertise to compete in today’s world oil markets. From this standpoint,

Improving KPC’sPerformance is theObjective of the Vision Project

Improving KPC’sPerformance is theObjective of the Vision Project


the Vision Project focused on these key objectives that would improve its performance regionally and globally while engaging in practical steps to reach KPC’s strategic objectives

The Vision Project has high-lighted the regulations and laws applicable in the oil sector and has touched on ways to face the challenges it faces and the un-ending quest to boost its posi-tion at the global level.

The Vision Project has focused on a holistic overview of the leg-islative foundation of the oil sec-tor as well as the redistribution of roles and responsibilities in the oil sector (policy-making, fi-nancial management and opera-tions) in a clear focused way tak-ing into account developments that occur in the oil sector itself.

With respect to the policies of the Supreme Council of Petrol, the Vision Project seeks to de-velop future guidelines of pe-troleum wealth, creating a gen-eral policy concerning petroleum wealth and adopting strategies for operations that are in line with policies and visions issued

by the policy-making body. The Vision Project also seeks to pre-pare operational plans (budgets and five-year-plans) and to im-plement these strategies and final approved plans independently.

The Vision Project has give great attention to details, to KPC’s organizational framework to transform KPC into a new kind of company managed on a commercial basis with a board of directors headed by non-executive Chairman. In addition, this transformation includes converting the oil company into appropriate work units that belong inside the new company structure, appointing expert members to the board of directors (provided that the majority of members come from outside the company), and retaining

companies that have international experience and skills.

In this context, the Vision Project has attempted to identify and select leaders, through the following key points:

•Establishing permanent spe-cialist committees for selecting leaders.

•Ensuring the availability ofleadership specifications in candidates.

•Givingauthority to theCEOand MDs to choose their team in coordination with the com-petent committee.

•Formingacentralunittoiden-tify, develop and follow-up on the leaders.

•Offering allowances to keepleaders.


management, strategic planning, human resources management, performance management, and the optimum utilization of val-ue.

The Vision Project has priori-tized areas of technology, re-search, and development with suitable solutions:

•Constructing a system formanaging information and at-tracting technology.

• Strengthening agreementswith international companies.

•Boosting relationships withtechnology companies.

• Intensifying theuseofglobalexperts in technical and ad-ministrative fields to support and achieve the strategic ob-jectives of the oil sector.

The project has focused also on activating key institutional sys-tems to reduce interference in KPC and its subsidiaries and to obtain support from the political leadership for these key systems. The project dealt also with link-ing performance evaluation with promotions and career develop-ment, activating and strength-ening systems for career train-ing and development systems, and developing mechanisms and programs to enhance public val-ues— loyalty, harmony, team-work spirit, trust and honesty, and not to fear risk.

The project has not neglected the role of monitoring authori-ties and their impact upon the performance of KPC and its subsidiaries. In this regard, the project identified certain specific requests as follows:

•FlexibilityoftheNationalAs-sembly through procedures

•Designing a mechanism tobenefit from the experience of former leaders through ad-visory boards and providing special guidance to leaders.

•Developing a mechanism forcontrolling and holding lead-ers accountable through spe-cialized independent bodies.

The Vision Project attempts to redesign work methods accord-ing to international systems by establishing and innovating a new organizational structure that focuses on: capital project


followed in discussing oil sec-tor projects and plans.

•Flexibilityinthecensorshipofthe Audit Bureau along with flexibility in the procedures of Environment Public Author-ity and the Public Authority for Industry; in addition to activating the internal control provisions in the new com-pany and its work units and activating the environment of internal self-censorship.

The Vision Project has dealt also with restructuring KPC and its subsidiaries, and redesigning work methods, especially as restruc-turing was implemented in Pet-rochemical Industry Company (PIC) with positive results. KPC’s reputation and position and that of its subsidiaries are a critical is-sue according to the media: there-fore, the Vision Project developed a strategic plan to showcase the achievements of the oil sector, to

develop effective work methods in line with best global practices, to qualify employees in media, to use international media specialists to engage in developing a positive role in the media, and to develop a mechanism to deal with foreign media during crisis.

The Vision Project focused also on benefits that accrue to KPC and its subsidiaries if these claus-es are fully implemented:

1. Seize opportunities to maxi-mize value-added contribu-tions to the State.

2. Safeguard work methods from continuous change.

3. Independence.

4. Develop one corporate iden-tity.

5. Realize integrated activities.

6. Reduce external interference.

7. Speed in decision-making.

8. Achieve harmony in the oil sector.

9. Easy exchange of experiences in the oil sector and promote development.

KPC has set a timetable for the gradual implementation of the Vision Project that meets with the current situation of the oil company in line with the renew-able strategy of the Kuwait Pe-troleum Company.


SeizingOpportunities

ProtectingContinuous

Change in Work Methods

Independence

One IdentityIntegrating Activities

Limiting External

Interference

Quicker DecisionMaking

AlignmentExchanging

Experiences inthe Oil Sector

"Despite the challenges the International Marketing sector faced during the last year, including the movement ofmany employees either by retirement, reshuffling or moving into the private sector, the sector has accomplished many achievements," remarked KPC Managing Director of International Marketing,Abdullatif Abdullah Al-Houti

in an interview with KPC World Magazine.

Al-Houti stated that the mar-keting sector in the past had focused on traditional mar-kets but as things change we will enter promising future markets including the African continent.

He confirmed that he had worked hard since he took

Historical RecordHike of Oil Prices… ‘Double-Edged Sword’

The Marketing Sector focuses on promising markets in addition to

traditional markets

Abdullatif Abdullah Al-HoutiManaging Director of KPC International Marketing

Historical RecordHike of Oil Prices… ‘Double-Edged Sword’


over the responsibility to de-velop and train all new cadres as well as to review the struc-ture of the International Mar-keting sector, moving it away from bureaucracy towards flexibility.

He pointed out that there are new techniques, which have entered the Internation-al Marketing sector such as quality, work evaluation, and promotions: they have been implemented according to justice and equality, and these steps will serve the work en-vironment considerably and, at the same time, will develop ‘the one team spirit’ in the oil sector as well.

Al-Houti described the histo-ry as well as the current record hike of the price of a barrel of oil as a ‘double-edged sword’; on the one hand, it pushes the countries for greater demand to put pressure on producers to increase supply in the inter-national markets, and on the other hand, at the same time, it will pressure these countries to look for new alternative en-ergy.

He pointed out that the Inter-national Marketing sector has many goals and plans to be implemented during the up-coming period such as expan-sion into the Chinese market as well as flexibility in work performance that helps make faster decisions.

What were the obstacles and difficulties that had affected the marketing sector in the previous period? Were they overcome?When I took over responsi-bilities for the International Marketing sector at the begin-ning of November last year, it

was a big challenge for me: in the two previous years almost 45-50 qualified employees left to work in the private sec-tor, others retired and some moved into another fields of the oil sector. Thus the first challenge I faced was the ap-pointment of four assistant directors and five new direc-tors and coordinators in No-vember and December 2008 where there were vacancies in all specializations. So I filled these spaces: I did not want to bring anyone from outside the International Marketing sector because existing em-ployees were qualified. There-fore we chose them through committees in phase one, and now, we are working to com-plete the second phase reshuf-fling officials to offices abroad and pumping new blood into the system with the coordina-tors. One of the difficulties I faced when I took the helm in the marketing sector is that it had long procedures in many issues where, for example, one paper was signed by more than one person.

Therefore we had to improve the method of work to speed up performance to be much more practical.

We have accomplished many achievements in spite of the brain drain

We have clients in Europe and America and our goal is to expand in

China and India


What about the volume of exports to Asian and Eu-ropean countries? What are the target markets in the next stage?When I assumed responsibility I tried to assess the situation of markets, that is, where we ex-port our petroleum products especially as oil prices are ris-ing and demand is increasing in Asia. Therefore we consid-ered the issue and impact of distributing crude oil and its products on our current mar-kets and to enter the promis-ing markets with confidence. Today, we provide China with 140,000 barrels per day of oil compared with 120,000 bar-rels per day since the Amir of Kuwait HH Sheikh Sabah Al-Sabah visited China last year. For India, it is a great market: we have long-term invest-ments there. We are trying to preserve our position in it and to develop projects that strengthen the role of Ku-waiti crude oil in this market by reviewing marketing plans in regions where we work. We could increase our sales in In-dia by 150,000 barrels of oil per day.

The markets of the African continent which we seek to enter are currently supplied by North African countries such as Libya and Algeria, West African states such as Angola and Nigeria, besides South Africa—these countries are major players in providing the African Continent with oil. In spite of this, there are custom-ers who come to us from the

African Continent asking if we can provide them with crude oil and now we are studying a specific strategy to enter places where we can ensure a profit-able ratio of investment.

Which markets have the best relationships?We have been dealing with East Asian markets for a long time and we are trying to keep up with their changing needs, as these markets provide us with high income. We have a presence in America and Northwest Europe and we are trying to increase expansion into China and India. We have also strong relationships with the Japanese, Korean and Tai-

What about the human element, which is the backbone of the marketing process?International Marketing is one of the most important departments in the oil sec-tor: the marketing staff is the backbone of this sector so they are our first priority—the more money and attention we spend on them the more they give in return. So we continue to focus on developing them especially as we have qualified employees in the marketing sector who are able to assume responsibility and make deci-sions.

Are there certain specifica-tions for employees in this sector?There are two types of em-ployees in the marketing sec-tor: employees inside Kuwait include employees working in Supply, Planning, Qual-ity Groups, and Market-ing Research. They must be technically strong: they must have enough experience and knowledge of the refining, production and tanker sec-tors inside Kuwait. Also they should be familiar with the oil sector companies and how to link them together.

The second type of employees is one who works with cus-tomers outside Kuwait, and they are exposed to situations which require speed, intuition and the abilities of negotiation and persuasion as well as a strong ability to communicate. In addition they must under-stand the client and the state in which the client works.

Al-Houti faced challenges after taking

responsibility

wanese markets. By increasing oil production in Kuwait in 2015 to 3 million barrels per day, the excess oil would be focused towards the Chinese and Indian markets as well as other Asian markets.

Are there any new tech-niques used by the Market-ing Department that con-tribute to enhancement and development?We are trying to bring new techniques into contractual processes and oil marketing although we are linked to cer-tain procedures as KPC is a government institution.


What is the difference be-tween working at KPC and working in the Kuwait Petroleum International (KPI)?Working at KPC is more complicated: at KPI, I was the buyer, but at KPC, I'm the seller. In KPC we assume responsibility for marketing all of Kuwait's products, and therefore we should achieve the higher income. Market-ing at KPC is subjected to mandatory laws and the Au-dit Bureau as KPC is a com-pany owned by the govern-ment and the Kuwaiti people have share in it whereas KPI is a trading company that is more flexible. However we are trying to enter into part-nerships with international private companies such as Shell, BP, and ExxonMobil because they have the market-ing capabilities, techniques, and background that helps to implement projects.

What do you think of the in-creasingly high of oil prices and whether it will continue to the next stage?Prices which are mentioned in the newspapers are correct. There are many factors affect-ing the price of oil such as the tough political situation in the GCC countries and the Mid-dle East, and some exporting countries in South America and West Africa in addition to the growing demand in the Chinese market. Also the price of oil is connected to the US dollar value, which has been reduced by 20-30%

in the last four years. There is also the fear of the continuing increase of oil prices that may reduce the demands on oil as in China, India, and Europe, which have started to examine other alternatives sources of less energy.

Do we have enough energy for the future?We have enough energy for future generations such as oil, gas, and coal in addition to other energies such as wind, but, it is clear that demand will continue to increase on oil, gas and coal in the fu-ture.

done by committees, and this, in my opinion, will serve the work environment significant-ly and will develop the ‘team spirit’ in the oil sector.

What about the marketing offices for KPC abroad?We have seven offices covering all regions and markets in To-kyo, London, Beijing, Singa-pore, Bombay, Pakistan, and Houston. These offices are representatives and coordina-tors with no negotiating role as negotiations are completed here in Kuwait. The only office that plays a greater role is the London office: it is headed by a director that manages KPI's purchases of crude oil and its products.

Tell us about the relation-ship between the subsidiar-ies and the International Marketing Sector?The cooperation between the subsidiaries falls within the objectives of the Vision Proj-ect—the Marketing Sector is dealing with the subsidiaries as part of KPC. Concerning any business trip abroad to at-tend conferences or to enter into agreements with custom-ers we ask employees who are part of these subsidiaries to join us.

What are your ambitions for the Marketing Department?My ambition is to get younger employees to reach high levels of superior performance, to expand into the Chinese mar-ket as well as strengthen our current position, and to be flexible in taking decisions.

We have used new tools to serve the work

environment and improve the team spirit

In your opinion, how can the work environment and teamwork spirit in the oil sector be enhanced?The Marketing Sector designs programs for relaxation and entertainment in Away Days, away from the responsibilities of work. As soon as I assumed responsibility, we organized an Away Day and a special lunch for all workers in the Market-ing Sector. Also we went to the Scientific Center and to the KPC camp. In this regard, I will appoint a special con-sultant to design a program covering all such activities. Promotions have now been implemented following the rules of justice, equality, and objectivity: selection has been


Environmental Fuel:

Part of KPC Strategic

Plan

Jalil Mohammed Shishtari: “Kuwait is a Regional Pioneer in the Production

and Consumption of Environmental Fuel”


Today’s major industrialized countries use modern tech-nology to reduce polluting emissions into the atmosphere that result from fuel combus-tion. They are focused on preserving the environment which affects human health requiring greater health care costs as well as the rehabilita-tion of the environment itself. They also need to satisfy en-vironmental fuel specifications required by the world’s petro-leum markets.

Out of these concerns emerged so-called environmental fuel or environment friendly fuel—a fuel with an emission’s ratio of sulphur (from combustion) which vanishes to 10 parts per million (PPM) approximately compared to traditional fu-els which contain up to 2000 ppm.

Under the umbrella of envi-ronmental fuel or clean fuels, KNPC launched a major proj-ect to keep up with world de-velopments and to ensure stable markets for Kuwaiti petroleum products in the medium- and long-term.

The environmental fuel project was the result of years of study and planning to be consistent with KPC’s concerns to pro-vide better oil products to the world market and, at the same time, to maintain its status as a major supplier of oil and oil de-rivatives.

Referring to the advantages of environmental fuel, Mr Shish-tari, KNPC Manager of the Environmental Fuel Project said, "At the present time, the amount of sulphur that goes up into the atmosphere from combustion processes is around

30 tons per day locally but this amount could vanish with the environmental fuel project when it reaches approximately 400 kg per day, a figure that is compatible with the global standards."

Regarding execution of the project, the first phase which is related to architectural design is about to be completed and now administrative procedures are in progress to get approval by KPC Board of Directors and the Supreme Council of Petrol to select contractors to begin construction. Total refining ca-pacity of KNPC will be 800,000 barrels per day not including the new refinery capacity once the construction project is completed. It is expected to be up-and-running by 2012.

The Environmental Fuel Project consists of 35 major factories

Environmental Fuel provides a

Healthy and Safe Environment


divided between both Mina Ahmadi Refinery and Abdullah Port Refinery in addition to other supporting plants. The task of these plants is based on (1) Separation of crude oil into different petroleum products beginning with naphtha, kerosene and diesel and ends with heavy fuel oil; (2) Conversion of heavy petroleum products into light petroleum products, for example, converting heavy fuel oil to diesel and kerosene; (3) Separation of various impurities from these products such as removing sulfur, heavy metals, and converting

different petroleum products into high purity products.

Support factories are working to get rid of

unwanted industrial-ization products such as flare gas and con-taminated water puri-fication which was part

of the manufacturing process itself.

KPC will market sul-phur in the world market produced from

The high cost of the project is offset by higher-priced

environmental fuel


its manufacturing pro-cesses as a high-qual-ity product. Sulphur is a main element in several industries such as key sulfuric acids industry, in many ba-sic chemical industries along with chemical fertilizer manufactur-ing.

Environmental fuel will provide high-qual-ity light products inte-grated with products to be provided by the new refinery (to be es-tablished) such as spe-cial heavy fuel oil for power plants and the special gas for medium

or light petrochemical production. Both en-vironmental fuel and refinery projects fall within the overall stra-

tegic policy of the oil sector in Kuwait.

The environmental fuel project has the ca-

pacity and flexibility to produce environmen-tal fuel with the high-est standards of qual-ity. It can also produce the fuel with lower standards of quality according to market requirement whereas fuel that will be used locally in Kuwaiti will match the highest-quality international standards.

By 2012 local markets are to adopt environ-mental fuel. However, Gulf countries have not yet adopted the environmental fuel and Kuwait is consid-ered to be a pioneer in the production and consumption of this future environmental fuel.


OPEC was created in 1960 following the Bagh-dad Conference led by five developing oil produc-ing countries - Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela to realize their legal rights in the global petroleum market, which at that time was dominated by multinational petroleum compa-nies known as the Seven Sisters. After OPEC was founded, nine countries became members, that is Qatar, Indonesia, Libya, UAE, Algeria, Nigeria, Ecuador, Gabon, and Angola.

Hasan Qabazard:

“Political & economicproduction factors arethe reasons behind oilprice fluctuations”

The influx of financial investments into commodity

markets has repeatedly helped to push crude oil prices higher


OPEC ObjectivesOPEC aims to coordinate and unify petroleum policies between the member counties to ensure fair and stable prices in the oil markets as well as avoiding unnecessary and harmful price volatil-ity. OPEC is also focused on ensuring active and regular supply to consuming counties in addition to ensuring profitable income to the sectors in-vesting in the petroleum industry. In the 1970s, OPEC became a visible organization in the glob-al oil arena; OPEC member countries could then control their local oil industry sectors in their own countries where they were able to control crude oil prices in the international petroleum markets. By the beginning of the 1980s, oil prices had reached a new high then plummeted to very low levels until the full breakdown of prices in 1986. By the end of the 1980s, there was a turnaround. Progress coincided with increasing awareness be-tween member countries of the importance of cooperation to realize oil market stability in addi-tion to the international environmental issues.

Now in the 21st century, oil markets have wit-nessed persistent market volatility especially dur-ing the last 10 months with crude prices skyrock-eting to more than US$130 per barrel despite the fact that global oil supply is sufficient and oil stock levels remain at a comfortable level.

Factors Affecting Oil Price Significant price fluctuations can mainly be attrib-uted to the weakness of the US dollar, increased capital flow into commodities from other asset classes, and speculations in the money markets. There are also other factors. Volatility in ongoing geopolitical developments, supply worries (e.g., disruptions due to the weather or politics), per-ceived market tightness and bottlenecks in the Re-finery sector are further contributions. Refinery bottlenecks are compounded by the fact that the refinery capacity expansion remains under pres-sure to keep pace with rising demand for lighter oil products and more stringent specifications. Thus, the weaker US dollar (besides making oil cheaper in other currencies) has also influenced oil prices through substitution in asset portfo-lios as investors seek to hedge against inflation. Therefore, the inflow of financial investments into commodity markets has repeatedly continued to push crude oil prices higher as other commodity prices continue to rise.

Oil & the World EconomyThe slowdown in the world economy with weak demand in the OECD region moderating fun-damentals does not support these oil price lev-els—this would normally warrant caution given

‘Financial dynamics’ are exerting a strong influence on prices

contributing to the high-price trend and price volatility


Oil Producing CountriesVolatility is harmful to all responsible parties in the industry for both the producer and consum-er. Bearing in mind the fact that petroleum rev-enue plays a central role in the economic and so-cial development of OPEC’s Member Countries, stable prices and revenue flow are very important for them in order that they can finance the huge petroleum investments required and also fund other pressing needs of their countries such as the provision of healthcare, education and the basic economic infrastructure. In the near term, volatility creates a climate of nervousness and un-certainty making it more difficult to determine the real market needs ahead. In the longer term, it makes it very difficult to create, develop and implement effective investment strategies.

With the ‘disconnect’ between current price volatility and market fundamentals, despite am-

the uncertain market outlook. ‘Financial dynam-ics’, however, are exerting a strong influence on prices, contributing to the high oil price trend and volatility in prices so that the continued per-petuation of oil price strength continues to defy market fundamentals.

High oil prices have not had a noticeable impact on the world economy so far, as strong global growth has allowed many regions to absorb the current price increases. Should higher oil prices persist, however, this might add inflationary pres-sure rendering economies more vulnerable espe-cially in the case of the less developed countries.

OPEC has always reiterated the importance of market stability and reasonable prices for both producers and consumers in the interests of the world economy at large and in particular the economies of the developing countries. Extreme prices, in either direction, for a sustained period are potentially damaging and therefore not desirable.

Market stability andreasonable prices are

important generally to global economic interests


ple crude supply, we see the heightened levels of speculation as a principal driving force. Oil has become a financial asset like other commodi-ties. The turmoil in some equity markets and the considerable depreciation in the US dollar have encouraged investors to seek better returns in commodities particularly in the crude oil futures market. In other words, the crude oil futures market has been seen as an alternative investment haven.

Citizenship: KuwaitDate of birth: 24 August 1955Marital status: married, three childrenFields of SpecialtyManagement of research and development in oil production, petroleum refining, petrochemical processes and corrosion science. Strategic and business planning for the petroleum, petrochemicals and related industries. Petroleum refining science, the science of catalysis & catalytic processes, operations research, and linear, non-linear and stochastic modeling, engineering education.Education❏ PhD in Chemical Engineering

Oklahoma State University, Stillwater, Oklahoma, USA, May 1990

❏ MSc in Chemical Engineering Oklahoma State University, Stillwater, Oklahoma, USA, December 1986

❏ BSc in Chemical Engineering University of Tennessee, Knoxville, Tennessee, USA, March 1979

Career Experience❏ Apr 06 – present Director

Research Division, Organization of the Petroleum Exporting Countries (OPEC), Vienna, Austria

❏ Jan 01 – Mar 06 Director and one of the Founders Petroleum Research and Studies Centre (PRSC); Kuwait Institute for Scientific Research (KISR), Kuwait

❏ Sep 98 – Jun 99 Consultant Strategic and Business Planning, Kuwait Catalyst Company

❏ Jan 92 – Jan 01 Manager Petroleum Technology Department, Petroleum, Petrochemicals and Materials Division, Kuwait Institute for Scientific Research (KISR), Kuwait

❏ July 90 – Jan 92 Associate Research Scientist Petroleum Technology Department, Petroleum, Petrochemicals and Materials Division, Kuwait Institute for Scientific Research (KISR), Kuwait

❏ Sep 88 – May 90 Consultant Philips Petroleum Company, Bartlesville, Oklahoma, USA

❏ Aug 84 – Sep 88 Research Associate Department of Chemical Engineering, Oklahoma State University, Stillwater, Oklahoma, USA

❏ Nov 82 – Aug 84 Research Associate Petroleum, Petrochemicals and Materials Division, Kuwait Institute for Scientific Research (KISR), Kuwait

❏ Jan 82 – Sep 82 Deputy Managing Director Arabian Light Metals Company, Ahmadi, Kuwait

❏ Nov 79 – Jan 82 Process Engineer Mina Al-Ahmadi Refinery, Crude Distillation, Kuwait Oil Company, Mina Ahmadi, Kuwait

❏ May 79 – Nov 79 Process Engineer Petrochemicals Industries Company, Shuaiba, Kuwait

Curriculum Vitae

Hasan M. Qabazard, PhD, PEOPEC, Director, Research Division

OPEC ensures crude oil supply but it has little or no influence

over main causes ofvolatility

The Role of OPECOPEC has played a major part in keeping the market well-supplied during the recent period of volatility with our Member Countries increas-ing crude output when needed, and accelerating capacity-expansion plans. These countries have also been increasing their presence downstream at home and abroad. In addition, OPEC has re-peatedly given assurances for present and future crude oil supply, which is important coming from an organization with a large share of the market as well as a solid future reserve base. However OPEC has little or no influence over the main causes of the volatility.

To conclude, OPEC does not see itself as a force but rather a reliable partner in a world of growing interdependence—interdependence which lies at the core of finding effective solutions to our com-mon challenges.


Mr. Muhammad Ghazi Al-Mutairi, DMD, Port Abdullah Refinery

Al-Mutairi: “The Shell Program relies on a deep and accurate study of all Refinery machinery”

Shell Merit Program: Advanced Key Benchmark in Mina Abdullah Refinery History

“Implementing high standards gives us the freedom to avoid urgent shutdowns”

In recent years, we have witnessed remarkable developments in the Port Abdullah Refinery especially after following through on the Shell Merit Program between Shell International and KNPC (represented by Port Abdullah Refinery). The Shell Merit Program focuses on developing work methods and reliability at the Refinery. The Program also concentrates on Risk-Based Inspection (RBI) for static equipment and pipelines, Reliability-Centered Main-tainance (RCM) for rotating equipment, and Instrument-Protected Factors (IPF) regarding various refinery equipment.


Eng. Marwan MaddouahTeam Leader, Industrial Efficiency

Eng. Musa’ed Mohammad Al-AradaTeam Leader, Inspection & Corrosion,

Abdullah RefineryMaddouah:

“Measuring levels of service is one priority

of restructuring”

Concerning the Shell Merit Program and its results, Mu-hammad Ghazi Al-Mutairi, DMD, Port Abdullah Refinery, remarked: "The Shell Merit Program recommendations were applied to all Refinery units. Meanwhile, these impor-tant recommendations are de-veloped together with specific requirements for each refining unit in the Refinery itself."

Al-Mutairi pointed out: “Oper-ations, Manufacture Engineer-ing, Mechanical Maintenance and Operations Planning to-gether with the Safety & Fire Departments have effectively participated in these RBI work-shops. Participation has helped increase the inspection periods as well improve the reliability of manufacturing units by provid-

ing better understanding of the mechanisms of corrosion and decomposition on various fixed kinds of equipment.”

Al-Mutairi mentioned that the Refinery was awarded the ISO 9001 Certificate for executing the RBI Program. The Inspec-tion and Corrosion Department is the first Department in the wider oil sector and at KNPC specifically to attain this inter-national quality certification.

1. Process Management and Work Methods: These achievements included inte-grated planning for all work cycles as well as determin-ing the right performance measure indicators for each cycle.

2. Management Competency & Reliability related to Risk and Reliability Manage-ment: RRM is an integrated program which comprises Reliability-Centered Main-tenance (RCM), Risk- Based Inspection (RBI), Instru-mented Protective Functions (IPF) and Defect Elimina-tion Program (DEP). Im-portantly the DEP Program depends on Root Cause Analysis, which aims to re-solve what are the causes

Eng. Marwan Maddouah, Port Abdullah Refinery, Industrial Efficiency Team Leader re-viewed the MERIT Project, saying: "In 2002, Shell Global Solution was identified as the project contractor, which out-lined seven related elements at the Refinery which needed improvement and performance enhancement:


Al-Arada: “Designing an integrated system in every Refinery Division and Department is part

of the Program”

and how to avoid them in the future.

3. Executing Work Efficiently: This aspect included issuing booklets determining work priorities as well as design-ing a Planning Guide Man-ual and maintenance duties charts/tabulation.

4. Contractual and Purchasing Operations: The Commercial Department was restructured and a Business Memorandum was signed between the Refin-eries and the Commercial De-partment to measure levels of services provided. Moreover, there is also an agreement to reduce the commercial re-serves of spare parts. This step led to an agreement with the suppliers of spare parts used in the refinery. The agree-ment stipulates that spare part storage will be carried out by the suppliers which reduces production costs, while, at the same time, limiting stor-age risks facing the company directly. As for indispensable spare parts and those parts frequently used, they will be stored in the Refinery.

5. Turn-Around Management Program: A comprehensive Guide Manual was released to outline Turnaround Man-agement Program methods organized by a specialized team who, in turn, would define responsibilities in other departments.

6. Small Project Management: A comprehensive Guide Manual was published to an-swer the question ’How to run small projects according to work requirements’ tak-ing into consideration com-mercial profitability together with Health, Safety & Envi-ronment standards.

7. Human Resources Aspects were included within the company’s wider general Competency-Based Pro-gram.

From his perspective, Eng. Musa'ed Mohammad Al-Ara-da, Port Abdulla Refinery, In-spection and Corrosion Team Leader, applauded the Inspec-tion and Corrosion Engineers who attained a reliable secure equipment operation, which, in turn, has helped to meet the best uses for the equipment as well as the Refinery’s pro-duction goals.

Al-Arada clarified that the Refinery has adopted a clear vision and a sys-temic framework helping to apply internationally-ac-credited integrated practices in every Refinery Division and Departments. He stressed the role fulfilled by the Inspection and Corrosion Depar tment to secure this kind of per-

Eng. Ahmad Al-AliSenior Specialist, Assets Management

Port Abdullah Refinery


Al-Ali: “Creating the Industrial Efficiency Department in the

Refinery is one of the Program outcomes”

formance of Refinery equip-ment and pipeline networks. Obviously, such a role requires collaboration between the Op-erations, Engineering, Mainte-nance, and Technical Services Departments supported by the Financial, Commercial, Infor-mation Services, Health & En-vironment Departments. This kind of detailed information explains the background to the Refinery’s current Standardiza-tion Certificate, awarded for the second time in October 2005.

Eng. Ahmad Mubarak Al-Ali, Port Abdullah Refinery, Senior Specialist Assets Management said: "The most important ad-vantages of the Shell Merit Pro-gram is to develop the Indus-trial Efficiency Department in the Refinery, a section, which strictly follows implementation of these studies within the Re-finery in addition to the Dam-ages Removal Program that is fully responsible for any dam-ages occuring in any area within the Refinery itself. Accordingly, a detailed report is being pre-

pared to outline possible rea-sons for these kinds of damages and how to avoid them in the future.

Moreover, the Industrial De-partment’s duties include the safety mechanism of the sensi-tive technology and protecting the operating system against low and high pressure, high temperatures, and testing cur-rent Refinery readiness to meet the total capacity of 94.4%. In this regard, and for this reason, 3-month Readiness Followups are conducted by the Team to identify strengths and weak-nesses in every aspect of the Refinery.


International Diesel Service flag flies high over Portugal

On April 7, 2008, in step with KPC strategy and to provide service to its customers, the Kuwait International Petroleum Company inaugurated its first diesel service outlet in Portugal targeting dense traffic heading north towards Porto and south towards Lisbon. The location of the station lies midway between the two cities and importantly is surrounded by industrial zone focused on local transportation. This first step is considered to be a promising beginning for the Kuwait International Petroleum Company on Portuguese soil as well as a proof that IDS, which belongs to the Kuwaiti International Petroleum Company is capable of reaching its goals and to realize greater success in the future.


In this regard, Mr. Esam Mar-zouk, Deputy Managing Direc-tor and Head of Operations at the Kuwait International Pe-troleum Company said, "The Kuwait International Petro-leum Company's activity does not stop at marketing gasoline in retail stations but rather it goes beyond that to diesel fuel activity that Europeans rely on for their trucks especially since trade between European coun-tries depends on land transpor-tation. Diesel is the mainstay of freight operations and hence oil companies have spearheaded particular contracts and agree-ments for diesel station service throughout Europe. Given the importance of these stations and their economic value, Ku-wait International Oil Com-pany operates sizeable numbers of stations spread throughout Europe all under the acronym IDS.

International diesel service sta-tions are interesting from a

number of design and logistical points of view. They have many characteristics that distinguish them from regular fuel stations such as the actual size of the station which has been expand-ed to fit the size of diesel trucks as well as the rapid filling of the trucks themselves. Speed is of the essence. A diesel truck can be filled with 120 liters per min-ute to reduce the actual time it takes to fill a truck with more than 800 liters of diesel fuel. Interestingly, the diesel service station is a welcoming sign on the highway, a rest point on a busy highway that enables truck drivers to stop when necessary. Most importantly service sta-tions are located strategically within the wider European highway system. Drivers for the International Diesel Ser-vice Company have maps of all company’s diesel locations that gives them the freedom to move easily and confidently within the European transpor-tation network.

And yet there is more. Inter-national Diesel Service stations provide important service such as the latest accounting and prepayment systems. It is cus-tomary within Europe that the truck driver travels lightly and primarily with credit cards such as the kinds of credit cards is-sued by the International Diesel Service Company to its clients.

Opening a new outlet for IDS in Portugal coincides with the opening of another outlet in Poland, and this is the comple-tion of a series of service pro-vided by IDS for its European customers in Sweden, Den-mark, Luxembourg, France,

Germany, Italy, Spain and oth-ers. A study is now underway to possibly open two new outlets to provide total diesel service coverage in northwest Europe.

With regard to the Hospitality System, Mr. Esam Marzouk ex-plained that the system is used globally, and it is based on leas-ing part of a station that belong to a major company to be used by the leasing company, IDS Company has followed this sys-tem to expand the company's work range, and for boosting trust with clients who want to be provided by this service per-manently.

Esam Marzouk: “The Portuguese

market is promising ...Our presence in it supports

our position in Europe”


Since risk is an inevitable and recurring issue considered to be an integral part of today’s industrial workplace, KPC began to develop, in the first quarter of this year, practical steps to create an Enterprise Risk Management Program. This ERM Program is considered to be a vital project—one that is an essential safety measure for KPC activities and its subsidiaries. The best use of human talent and resources helps to deal with risk in the best way: ultimately planning achieves several economic benefits. If risks are ignored, the results are detrimental to the interests and plans that KPC aims to achieve.

KPC continues to follow an ambitious and suc-cessful system and operation’s methods. Yet there remains other issues which include risk management. They require advanced levels of leadership by the Board of Directors. Risk gov-ernance, policy and methods as well as improve-

ments in risk measurement and reporting of potential risks re-main central to these issues.

Enterprise Risk Management (ERM)

KPC’s Enterprise Risk Manage-ment Program (ERM) has put in place important processes to identify the measurement of ma-jor risks, the management and reduction of these risks and the preparation of risk management reports.. The ERM Program

also supports special governance requirements of the KPC Board of Directors, gives ‘more space’ to decision-making based on knowledge and information, and identifies spe-cial areas that target best value. It continues to be vital to develop and maintain a comprehen-sive integrated vision of associated risks regard-ing the allocation of KPC capital with best in-ternational practices in place to properly protect KPC business interests.

Sets High Performance GoalsKPC Enterprise Risk Management Project

Mr. Bader Al-ShumaimriManager, Risk Management


The KPC ERM Program has been designed in a very systematic way at the level of leadership, control, supervision and participation by execu-tive and senior management.

A simple definition of the ERM Program can be outlined in this way:

•asystematicprogramadoptedbyKPCanditssubsidiaries to maintain its enterprise proj-ects.

•the identification and assessment of majorrisks that face KPC and its subsidiaries.

•thesupportandassistanceoftheKPCBoardof Directors to ensure that informed deci-sions concerning major risks are focused on the desired results.

Program ObjectivesThe ERM Program aims to improve business value while giving the best return on investment, achieving optimal results from these opportuni-ties, and quickly identifying risks that need to be avoided. It also aims to achieve a better re-turn on capital investment and resources based on risk.

The ERM program also fosters a deeper un-derstanding of relationships between risks, and in the process enhances a renewed sense of re-sponsibility among employees; importantly, it develops the ability to continuously monitor and report on risks that KPC faces, starting with operations and ending with the Board of Direc-tors. One of the program objectives is to develop a common language that helps to organize the activities of Risk Management Department and improves the ‘risk culture’ at KPC.

The development of the KPC Enterprise Risk Management (ERM)

Program aims at ensuring an integrated vision for risk management

across the entire company


ERM Scope of ApplicationThe Enterprise Risk Management Program, at one level, can simply be described as an expres-sion of ‘information supported by facts’. So the implementation of this scientifically-based ERM system safeguards KPC decisions with in-formed information that achieves higher more consistent results. The ERM Program includes all KPC sectors, departments and subsidiaries: it is the responsibility of all employees —every-one has a role and responsibility to play in order for this ERM Program to succeed. Basically, the responsibility and role of every employee is to know the objectives of the department wherever they work, to be familiar with risks and how to identify them.

ERM Elements of Success

KPC’s ERM Program is directly connected with work perfor-mance. For example, the Risk Management Department intro-duces employee responsibilities and duties regarding Health and Safety systems that should be implemented by KPC employ-ees. A better work and risk per-formance system and methods contributes to filling in the gaps within the current system while avoiding the negative challenges in the workplace.

One important element that highlights future success is how to deal with major risks and disas-ters. KPC continues to focus on this important aspect of its wider risk management program as it also continues to increase its wider risk man-agement impact across the entire company.

It is worth mentioning that there are approxi-mately 800 registered risks that the KPC Risk Management Department hopes to overcome through its integrated research study. Raising

awareness is also a vital aspect of communica-tion risk awareness for KPC employees and its subsidiaries.

Media Awareness CampaignA targeted media campaign with ‘a Kuwaiti spirit’ has been launched to begin the implementation of practical steps in the Program and to promote ERM Program awareness and its role in boost-ing performance in the oil sector. When leaders of the Enterprise Risk Management Department decided to launch Phase 2 of the program held under the auspices of Mr. Ali Al-Hajri, KPC Managing Director, Financial and Administra-tive Affairs, they had a clear vision coupled with a strong sense that the current media campaign must reflect how important this Program is.

They also believed that the ERM Program has a leading role to play based on the successful his-tory and accomplishments of the Kuwait Petroleum Corporation.

From this perspective, the Enter-prise Risk Management team in coordination with the Media De-partment has designed a distinc-tive campaign included posters, flyers, and brochures highlight-ing the history of Kuwait and the historic events surrounding the Kuwaiti oil industry.

Regarding the introductory ERM Awareness Campaign, Mr. Bader Al-Shu-mairi, Manager, Risk Management Department, remarked that when the Awareness Campaign was launched in April 2007 it was directed to-wards executive and senior management. “Sev-eral meetings with various KPC departments and oil companies were held,” Al-Shumairi said, “to inform people how the Program would be implemented as well as its objectives and desired results. A number of integrated communication channels were used including posters carrying short messages, an ERM site inside KPC's offi-

Mrs. Iman Al-GharaballiTeam Leader, Risk Management


cial website, press releases as well as introducto-ry internal and external presentations. This was Phase 1 of implementing the ERM Program.”

“Phase 2 began last April, 2008,” continued Al-Shumairi, “by holding weekly employee meet-ings in Arabic and English, to ensure that ev-eryone was aware of KPC’s current risk record and to inform them of Risk Management policy details. In addition, these meetings focused on how these policies would be implemented in de-tail—thus ensuring the success of this important Program. The Program is still underway. In fact, there are weekly meetings between KPC officials and its subsidiaries to determine the levels al-ready reached and to clarify remaining issues of concern.”

The ERM Program is designed to focus on a better understanding of the interactions and internal relationships

between the issues surrounding the field of risk and risk management

and, at the same time, to augment a sense of responsibility

ERM Program: Harmony with Kuwait’s IdentityMrs. Iman Al-Gharaballi—who originally sug-gested the idea for the Awareness Campaign and an active member of the ERM Program—high-lighted the need to relate KPC's Enterprise Risk Management Program with Kuwait’s identity: she expressed pride in KPC’s leadership in es-tablishing the first move in such an important program. Images were chosen to highlight how Kuwait’s forefathers took calculated risks into account that eventually led to the wealth Kuwait enjoys today. Pride in the past such as pearl div-ing or digging for the first oil in Burgan field has strong unbreakable links to the future of the State of Kuwait.


Originally signed in 1987, the Montreal Protocol is an international treaty designed to phase out the production of a number of substances like chlorofluorocarbons (CFCs) which are believed to be re-sponsible for ozone depletion, and in the process to protect the earth’s delicate ozone layer. Since then it has un-

dergone seven revisions and was substantially amended in 1992, and again in 1995.

Ozone is a gas with a peculiar odor and bluish color: ozone concentrates in the earth’s stratosphere at 90% and in the troposphere at 10%.

The Montreal Protocol in-cludes provisions for devel-

oping countries to include a number of gases like carbon dioxide, which are considered to be ‘greenhouse gases’ that trap terrestrial (i.e., infrared) radiation and contribute to the potential for global warm-ing. Ozone also contributes to global warming with another set of ‘greenhouse gases’ that lead to harmful effects on hu-

The Montreal Protocol

International Treaty to Protect Ozone Layer


man beings as well as the en-vironment.

Scientists have continued to raise the issue about the con-tinued depletion of the ozone layer resulting from human activities. These activities lead to a series of chemical reac-tions of some compounds, and in particular, to a series of reactions with chlorofluo-rocarbons compounds which do not dissolve in the upper atmosphere but rather stay in the air for many years, which, in turn, helps chlorine contin-ue to deplete the ozone layer itself.

Ozone-Depleting SubstancesA. Carbon Substances1. carbon monoxide2. carbon dioxide3. methane4. Types of non-methane

hydrocarbons

B. Nitrogen substances 1. nitrous oxide2. nitrogen oxide

stratosphere where they finally begin to decompose releasing free chlorine atoms with great ability to deplete the ozone layer—one atom of chlorine depletes about 10,000 mol-ecules of ozone.

Scientific research and knowl-edge provides a window on how important it is to protect the ozone layer wordwide be-cause these dangers and effects continue to be global which may threaten all human life. Cooperation must continue, therefore, to be international in scope.

For its part, the State of Ku-wait has adopted its own

C. Carbon Chlorine sub-stances

1. fully halogenated: carbon tetrachloride (CCl4) - fre-on (CFC 11, CFC 12, CFC 113, CFC 114, and CFC 115)

2. Partially halogenated: (chloroform - freon (21-22)

D. Bromine substances

E. Hydrogen substances

1. hydrogen gas

2. water

Freon (CFCs) continues to have a substantial and unfor-tunately negative impact upon the ozone layer: industrial materials containing carbon, fluorine and chlorine (only) are called fully-halogenated, and if they contain hydrogen (as in the case of freon 21-22) they are called partially-halo-genated substances. Unfor-tunately, these substances are chemically stable and do not decompose easily—in fact, they remain in the tropo-sphere for 100 years near to the earth without decompos-ing. Then they begin to move towards outer space into the


country-wide method to meet its commitment to these en-vironmental conventions. Kuwait has shared in the commitment with the interna-tional community to protect the global environment from the risks that threaten human health and the environment (The Vienna Convention to protect the ozone layer was established in 1992).

At the beginning, Kuwait complied within Article (2) of the Montreal Protocol, that deals with control measures in terms of consumption of

substances that deplete the ozone layer, In 1992-1993, an Ozone Committee was estab-lished in Kuwait to complete-ly survey the State of Kuwait regarding the actual amount of substances consumed that deplete the ozone layer. Sev-eral agreements followed. An Amiri decree (135/1992) was issued for Kuwait to sign the Vienna Convention for the Protection of the Ozone as well as the earlier Montreal Protocol on Substances that Deplete the Ozone Layer. In 1994 an Amiri decree was

issued (13/1994) to ratify the London and Copenhagen Amendment. The State of Kuwait was then re-classified within Article 5 of the Montreal Protocol, which entitled Kuwait to delay for ten years its compliance with control measures in order to meet its basic domestic needs. In 1997 importing crude halons was banned: the National Committee for Ozone Layer Protection was established. In 1999, the freezing of freon began in Kuwait, and, in the same


year, the Supreme Council of Environment developed a draft law to control ozone-depleting substances.

The 21st century has brought a renewed sense of urgency about the environment world-wide. In 2000, a decision was issued by the Ministry of Com-merce (256/2000) on ozone-depleting substances. In 2001 the National Program for the Disposal of Substances that Deplete the Ozone Layer was launched. The following year a national program was com-pleted which was approved by the Executive Commit-tee of the Multilateral Fund. The State of Kuwait joined the Montreal Amendment in 2003.

KPC is working together with the Kuwait Environment Pub-lic Authority. In 2000 KPC became a member of the Na-tional Committee of Ozone in representing its subsidiaries. In 2004, the UN established the United Nation Environ-ment Program, which, in turn, created COTC, a Chemical Option Technical Committee consisting of 19 international consulting members. KPC was nominated to represent the GCC countries.

KPC Role in Environ-Mental ProgramsKPC continues to focus on implementing all environmen-tal regulations to meet current international environmental targets. In collaboration with the Ozone Committee, KPC has held several meetings with

its subsidiaries and has held wider awareness lectures to explain how to replace ozone-depleting substances with al-ternative substances. Environ-mentally-friendly substances are important to KPC’s long-term strategy so, in this re-gard, the company has re-placed most of the production units that contain substances that deplete ozone: they have stored them in specific stores to cooperate with the Ku-wait Environment Public Au-

thority in the way of storage. KEPC also helps companies regarding how best to store these substances: it has a data-bank that includes the quan-tities and types of substances that depletes ozone and how to dispose of them.

In 2008, the State of Kuwait was recognized by the UN for its environmental efforts spearheaded by the Commit-tee of Ozone regarding these important environmental pro-grams.


KPC Strives to Becomea Regional Leader in Health, Safety and Environment

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P.O. Box: 26565, 13126 Safat, Kuwait - Fax: 499 4991Email: [email protected] - www.kpc.com.kw

quarterly magazine, issue no. 45, july 2008 · ment certificate for the nghi son refinery &...

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