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1 Issue No. 30 October - December 2004 KPC s New Board of Directors Nader Sultan Bids Farewell to the Oil Sector Promising KPC Ventures in China KPI Sells 75 Stations in Britain Mina Abdullah Introduces Sulphur Extraction Units Unifying Gulf Oil Marketing Efforts New Oil Training Strategies Giant Initiatives to Update Tanker Fleet

2 KPI s clever marketing strategy to increase profits and elevate its market standing. Mina Abdullah Refinery introduces new sulphur extraction units in a quest to preserve the environment. Houston Office celebrates 10th anniversary. Editorial Team Mohammad Al-Zamanan Merwi Al-Khaldi Kamal Al-Khars Sheikha Al-Tourah Rawabi Al-Bannai Dhary Al-Jarallah Alia Al-Jasmi Copy-editing Trident EWC English Writing Consultants L.L.P. Artwork & Design Four Films Printing Press Group The KPC World Editorial Team expresses its thanks and appreciation to all who contributed editorial and information material and photograph to produce this issue of KPC world P.O.Box: Safat Kuwait Tel.: (965) Fax: (965) Website: media@kpc.com.kw 3 KPC World Oct., Dec. 2004

3 Issue No. 30 October - December 2004 IN THIS ISSUE 8 22 KPC starts a new phase of change with the appointment of its new Board of Directors. KOTC s ambitious plans to update its tanker fleet to international standards. 6 KPC s outstanding participation in the International OPEC Conference. 10 Nader Sultan announces his retirement and passes the baton to Hani Hussein. In his parting interview, Sultan talks about his career milestones, key memories, challenges he faced and aspirations for the oil sector. 14 Sheikh Talal Al Khalid Al Sabah sheds light on KPC s plans to gain a stronghold in China. 2 KPC World Oct., Dec KPC s New Board of Directors Nader Sultan Bids Farewell to the Oil Sector Promising KPC Ventures in China KPI Sells 75 Stations in Britain Mina Abdullah Introduces Sulphur Extraction Units Unifying Gulf Oil Marketing Efforts New Oil Training Strategies Giant Initiatives to Update Tanker Fleet KPC Mission Kuwait Petroleum Corporation is a State owned and commercially oriented corporation. It is one of the leading oil and gas producing companies in the world and its activities are focused on petroleum exploration, reþning, and marketing petrochemicals and transportation. Our mission is to manage and develop these integrated activities worldwide in the most effective manner so as to ensure the optimum exploitation of Kuwait s hydrocarbon resources to achieve the maximum Þnancial return to our shareholders, the Government of the State of Kuwait and develop the capabilities of the national manpower. Editor-in-Chief Talal Al Khalid Al Sabah Managing Director Petroleum Services

4 OPEC Elects Al Fahad President, Increase production by 1 million bpd OPEC has extended a message to calm down to the oil markets and decided to increase the ceiling of oil production by an increase of one million bpd, in the hope to reduce prices. The new production ceiling effective from 1st of November 2004 will be 27 million bpd. OPEC s decision was intended as a reassuring signal to the oil markets. The Conference elected HE Sheikh Ahmad Al-Fahad Al-Ahmad Al-Sabah, Minister of Energy and Chairman of KPC s Board of Directors, as President of the Conference for one year, with effect from January 1, OPEC Chairman and Minister of Energy & Mineral Resources of Indonesia Mr. Burnomo Yusijia Ntoro said that the message we want to send to the market is that prices should be reduced because we consider it as very high. With raising the ceiling of its production, OPEC hopes to restore back the average price of its basket which includes seven-world crude oil from $ 38 to 30 for one barrel. In an ofþcial press statement following the meeting, OPEC announced that the decision was made based on a study on current oil market. The Conference noted that higher crude oil prices are a result of key factors which are the demand surge earlier in the year, especially in North America, China and Asian countries, geopolitical factors and concern about adequacy of spare capacity to meet possible supply disruptions, exacerbated by the signiþcant impact of speculators and by tightness experienced in the downstream industry. It also observed that OPEC s timely actions had been effective in ensuring that the market remains well supplied, resulting in commercial OECD stocks build-up to levels close to normal, thus succeeding in reversing the OPEC Reference Basket price trend down to levels around US$38/b. During their meeting OPEC members highlighted the importance of further strengthening effective co-operation with all OPEC has extended a message to calm down to the oil markets and decided to increase the ceiling of oil production by an increase of one million bpd, in the hope to reduce prices. non-opec producing countries in the interests of maintaining stability in the oil market with reasonable prices acceptable to both producers and consumers. Taking into consideration the market outlook for 2005, with its concomitant uncertainties, especially in the Þrst and second quarters, the Conference further decided to convene an Extraordinary Meeting in Cairo, Egypt, on December 10, 2004 to review market developments and take whatever measures are deemed appropriate at that time. Taking this decision in recognition of the importance of maintaining oil market stability for the beneþt of the world economy, as well as consumers and producers, the Conference expressed its expectation that non-opec oil producers will take concrete measures to actively share with the Organization the responsibility of maintaining price and market stability in 2005 and thereafter. 5

5 EDITORIAL New Management, Promising Future 4 With every new issue of our magazine, my mind becomes congested with ideas competing for a place in the few lines that I am allowed for in this message, so numerous are the events and developments that take place between one issue and the next. In this instance, perhaps the most notable development recently witnessed in the oil arena was the signiþcant change that took place at the top echelon of KPC. I guess the only appropriate thing to say is to express our congratulations to all the new board members and our thanks and appreciation to the former members. Because I am a KPC employee, my testimony will probably be somewhat biased. But biased or not, I feel I cannot conceal my happiness when I meet foreign persons and hear the words of praise and admiration they have for the Kuwaiti oil industry. I can see the pleasant surprise in their eyes as they talk about the experience gained by Kuwaiti oil ofþcials and the success they achieved in raising our national oil industry to the highest international standards. I believe that you, like me, will talk, with a certain degree of modesty, about the great expectations the Kuwaiti youth have with regard to further developing and raising the standards of this national industry, and about the increasing experience they are gaining, under the never-ending support from our political leadership who have assumed total commitment toward the oil sector. KPC, as one of the world largest oil establishments, has succeeded in drawing a clear and well-deþned strategy whose main objective is to enhance the standards of the Kuwaiti oil industry in all Þelds of activity : production, reþning, facility and Þeld development, security and safety for both facilities and manpower and developing environmental protection standards and means. To upgrade capability and enhance performance, KPC took a major step last month by effecting critical changes at its senior management level in preparation for the coming phase of further changes and developments and to enable it to face the challenges and high expectations for developing our oil industry. Through these changes, KPC seeks to implement the ambitious programs associated with its long-term strategy, foremost among which is to increase crude production, upgrade reþning capacity, develop security and safety means and enhance environment protection procedures. Armed with the strong belief that its greatest strengths lie in its manpower, one of KPC s key objectives is to develop the capabilities and efþciency of its employees by providing such training sessions as would develop their skills. Indeed, the project of renovating the Petroleum Training Centre is a major step in that direction. While it strives to further its presence in the global markets, particularly in China, one of the most promising, the Corporation continues its efforts to strengthening its position as a leading operator in the international oil markets. To this end, KPC sold 75 fuel stations owned by its wholly owned subsidiary, KPI, in order to focus on higher yielding projects. KPC has also begun a huge strategic project by signing an agreement to build seven new oil tankers for another subsidiary, Kuwait Oil Tankers Company, as part of a scheme to modernize its ßeet. At the global level, Kuwait continues to play a positive role within the Organization of Petroleum Exporting Countries (OPEC), in order to maintain stability in the world oil markets. Kuwait continues to support this organization and strengthen its role and position in addressing changes in the oil markets and seeking to achieve a fair balance between the interests of both producers and consumers. In conclusion, I would like to say that the changes that KPC has witnessed at its highest echelons, will enable it to face the tremendous challenges that stand in the way of realizing its ambitions and achieving its goals. I also call upon all employees of the oil sector to increase efforts to enhance our oil industry and enable it to keep abreast of the huge developments that this sector is witnessing at the world level. Talal Al-Khalid Al Sabah Managing Director Petroleum Services Editor -in-chief

6 Nawaf Al Sabah-Manager Washington OfÞce, Waleed Al Hashash-Manager Naphtha Sales Department, and Nawal Al Fuzai from the Ministry of Energy. It is worth noting that extensive preparations for the event started a year ago when the Public Relations Department undertook the assignment. The team comprising Tariq Amin, Jamal Al Houli and Abdullah Faleh, spared no effort to ensure its success and extreme care was exerted regarding the choice of venue, invitee list, entertainment programme and other details. 7

7 (From right) Dr. Mohammad Al Ramadan, Nader Sultan, Seham Razzouqi, Abas Naqi, Mohammed Shatti, Nawal Al Fuzai, Waleed Hashash, Sheikh Nawaf Al-Sabah and Ali Murad KPC S OUTSTANDING PARTICIPATION IN OPEC CONFERENCE KPC held a grand reception party in honour oil industry and the vital role OPEC plans to of participants in the OPEC Petroleum ensure market stability. 6 Conference in Vienna last month. The event took place in the historic Hofburg castle under the auspices of Sheikh Ahmad Al Fahad Al Sabah-Minister of Energy. He was deputised by Ms. Seham Razzouqi former Managing Director Finance, Administrative Affairs and International Relations and Kuwait s Governor at OPEC. Ms. Razzouqi delivered the keynote address in which she welcomed all guests and brushed on the escalating importance of the The reception was well attended by key personalities from international, regional, and gulf oil companies. It was also attended by Kuwait s Ambassador to Vienna Mr. Fouzi Al Jassem. KPC s delegation comprised Mr. Nader Sultan-former Deputy Chairman & CEO, Abbas Naqi-Undersecretary at the Ministry of Energy, Dr. Mohammad Al Ramadan-EAMD HSE and Decision Support, Ali Murad- Manager Public Relations,Mohammad Al Shatti-Manager Market Research, Sheikh Seham Razzouqi

8 Ahmad Al Arbeed Managing Director Project Kuwait & Steering Role in Privatization, Research & Development Farouq Al Zanki Managing Director Exploration & Production & Chairman of KOC Khalid Saleh Buhamra Board Member Ministry of Energy Undersecretary Board Member Representative from the Ministry of Finance Board Member Abdulmalik Mohammad Al Gharabally Board Member Yahia Fahad Al-Sumait Board Member The following Managing Directors have been selected: Bader Nasser Al Khashti Managing Director & Chairman of KUFPEC Suheil Yousef Bu Qurais Managing Director Planning & Finance Sheikha Shatha Al Sabah Managing Director Training Affairs 9 Iqbal Mohammad Al Ghanim Managing Director Administration Abdulatif Abdullah Al Houti Managing Director & Chairman KPC Holdings Aruba Abdulhadi Marzouq Al Awadh Managing Director & Chairman KGOC

9 A NEW BOARD FOR KPC An Amiri decree was issued appointing the new KPC s Board of Directors. The new Board consists of the following members: Sheikh Ahmad Fahad Al Sabah Minister of Energy & Chairman of KPC s Board of Director Hani Abdulaziz Hussein Chief Executive OfÞcer Abdullah Hamad Al Roumi Managing Director Transportation & Chairman KOTC Sheikh Talal Al Khalid Managing Director Petroleum Services 8 Sami Fahad Al Rusheid Managing Director ReÞning & Local Marketing & Chairman KNPC Jamal Abdulkhaliq Al Nouri Managing Director International Marketing Saad Al Shuwaib Managing Director Petrochemical Industries & Chairman PIC

10 An archive photo of Mr. Sultan during his tenure at KPI You set all speculations at rest when you announced your retirement. Why did you choose to retire? The Þrst reason is because life at the position of Deputy Chairman and CEO is Þlled with so much pressure and tension that you could say that each year in the job is equivalent to two years! So having been Deputy Chairman for 11 years it feels like I have been here for double that time, 22 years! So that takes me way past my retirement age. The second reason was that I needed change and I genuinely believed that KPC also needed a change at the CEO level. Positive change is very beneþcial and with Hani taking over, the change will be a positive one so that was a very important aspect of my decision. But the announcement was relatively early. That was done on purpose, because I thought it was important that there is transparency and everyone knows of the pending change. There was a lot of uncertainty and rumours and this was an effective way of giving clarity to the situation and also allow people to make decisions in the next few months about their own futures. What are your key memories as you reßect on your 33 years in KPC? Sultan took part in major deals and mergers. Seen here with Ms. Seham Razzouqi (right) at the sale of Santa Fe shares only EAMD Marketing in Kuwait at that time, that there was a major explosion of the naptha tanks in our reþneries. So in Marketing we had to mobilize a team quickly to put in place the urgent import of motor gasoline for Kuwait. All of these crises really brought out the best in the Kuwaiti talent. During your long years in the oil sector what was your biggest gain? The interesting aspect is that the oil sector has given me an opportunity for this very wide and varied experience. Where else could I have got an experience of working in marketing in London in the 70s and then in Kuwait, working in the Asian markets and the European markets, working as Supply Manager, EAMD Planning, and then taking part in what I call major acquisitions. Later, I was asked to take over the downstream operations in Europe and learned how one competes with international majors in winning customers. Then I was involved in major deals such as the sale of the Santa Fe shares, the restructuring of Santa Fe, the merger between Rhone-Poulenc and Hoechst. So I think I have to be grateful to the Kuwaiti oil industry because it really gave us the opportunity to have a very wide and rich experience in a variety of activities. Through these transactions and activities, what I gained was experience and equally important I developed relationships which turned into friendships. What advice would you give to the young Kuwaitis? When I reßect upon my experience, the Þrst advice I would give is to recommend the oil sector in Kuwait as probably one of the best places to get a professional experience since oil plays such a huge role in the economy of Kuwait. It is the sector where I believe even young people can make a genuine contribution. The oil sector on the one hand can offer you a rich experience, competitive salaries but at the same time it allows one to make a difference. The second advice is to always push yourself to improve your knowledge and capabilities. I know that some people complain that their colleagues get promoted as a result of wasta but the best managers and executives I know in the oil sector, got their positions through merit, hard work, and developing their skills. The third is to treat everyone with the same respect that you would like them to treat you, I will talk about this more later. The Þnal advice is to remember you have a family and give them your priority. Your family gives you the strength and happiness you need to perform better. Well if I was asked to reßect on all my memories, I would Þll up the whole magazine. I recall a Chinese saying which says old age is when you no longer have dreams you only have memories and I hope I haven t reached that stage yet. I think the main memories that I will take away are probably the memories of the major crises which we had to face over the last 33 years. I have to be grateful to the oil sector which has given me the chance to have such experiences. For instance, I recall in the early 70s when the oil boycott took place, and the Iranian revolution in the late 70s, which caused a huge spike in oil prices. I also recall the nationalization of the oil industry in Kuwait in the mid 70s, the collapse of the oil prices in the mid 80s, the invasion of Kuwait in 1990, the October build-up in 1994, and the war in All these many crises have a common feature which was the way we as Kuwaitis and as management worked as a team. I recall for instance a phone call I received during the month of August in the early 80s when I was the With Sheikh Ahmad Al-Fahad at his farewell party 11

11 By: Sheikha Al Tourah 10 After the span of more than three decades in the oil sector, Nader Sultan announced his retirement of his position as the Deputy Chairman and Chief Executive Officer passing on the baton to his old friend and colleague Hani Abdulaziz Hussein to lead what he aptly described as the VLCC of KPC. In leaving Sultan left a huge vacuum that will be very difficult to fill, and an unmatched work legacy for generations to come. His climb to the top rung was awe-inspiring. During his prolific career, Sultan steadily attained one career milestone after the other. He began his career in the early 70s at the Kuwait National Petroleum Company as an executive trainee and has held a series of positions of increasing responsibility, including Assistant Regional Sales Manager, Manager (International Marketing), Sales Manager (West of Suez) and Supply Manager. He then joined KPC upon its inception as an Executive Assistant Managing Director for Worldwide Product sales, based in Kuwait, and was responsible for the marketing of KPC s crude oil and products in Europe and America. Then he became the President of Kuwait Petroleum International Limited (KPI) since its formation in July 1983, and is credited with establishing its strong foundation and elevating it to the status it has reached today. He played a major role during the invasion of Kuwait and after the liberation he was designated as the Deputy Chairman & Managing Director Planning & International Operations, and then he was appointed as Deputy Chairman & Chief Executive Officer. Admirably, Sultan had an inimitable work style and progressive thinking approach. What he will be most remembered for apart from his evident footprints in the oil sector in every realm is his down to earth nature and the respect in which he treated all who worked with him. In the following interview, Sultan reveals his most memorable memories and career highlights.

12 In an interview with hit show 60 Minutes with Sheikh Ahmad being there and that they will be able to support to each other, in their respective challenging roles. What was the key objective that made you take on this high level position? I took the position with an objective to use what I learned in KPI, in an international competitive environment, and apply those to KPC in Kuwait. KPC was formed and created on a very strong foundation. When Abdulrazzaq Mulla Hussein decided to leave, what he left was a very strong foundation that really helped me in building on it and to take it to another level. I think that will be for others to judge if we succeeded or not. What I wanted to bring to the oil sector was Þrstly an external orientation. What I mean by that is to enable people here to look at the business not simply from their departmental foundation role but to look at its external role in terms of its customers and competitors so as to have an have external vision. Every department has customers whether they are external or internal and we also have competitors in the business. The Þrst thing we said was that we are not operating in a vacuum, we are operating in an international world where there are competitors and customers and you win customers on the expense of competitors. That external vision has to be there in the orientation. The second thing we tried to achieve was how we can create within a national oil company a professional culture. I wanted to bring a professional culture because we as a state owned company had the challenge of working with a professional approach. So we had to consider implementing things such as performance targets and performance indicators to meet the challenge of competing with international oil companies. experiences and the strategic thinking of the younger people that I had the privilege of coming in contact with. For instance, one way of challenging the young people was in the way I interacted with them in meetings, asking their views and questioning their reasoning. What are the principles and guidelines that you ve followed and have taken you to where you are today? In addition to the points I made in your question about advice, one guideline is that you must always try to be positive and optimistic. Things can go really bad and you must have the ability remain positive. A second is that you have to be able to switch off to manage the stress. A third element is to have basic time management skills as it really helps in managing stress. What also helps here is regular exercise. So optimism, a positive attitude, stress management are important. One more element is setting a standard by which you treat people. I learnt very early that it is not the position that gets you respect. It is you as a person and how you treat others that gains you respect. If you want the best out of people, you have to treat them with respect. You have to invest your time in the people. It is not always easy. What is your vision for KPC? During one of the key marketing meetings with an Indian delegation The vision for KPC has to be enacted by the new CEO and his new team. The way I deþned vision earlier is where things are better in small ways in the future than they are today. I am conþdent that in three years from now I will be able to look at the KPC that Hani has created and I will deþnitely see improvements in many areas. What do you wish for your successor? Well most of all I wish for him and his family is that God will give them good health and happiness. I also wish for him that he gets the full support from H.E the Minister, from his management team and all his colleagues at KPC. The challenges that he will face are not small. You have to give Hani credit that his decision to accept this responsibility is a very courageous one. The position of the CEO comes with a lot of pressures, political and social. So it takes a courageous man to be prepared to carry that burden of responsibility, and Hani is such a man. So I wish for him and all my friends in KPC all the success and may God protect them. On a professional level what is it that motivates you? I believe it is very important to have a vision and clarity of where you are going and to support that with a positive attitude. To me vision is where you have a goal three years down the road. You need to have a vision for the company and yourself. You then say I want to make small improvements versus where I am today. Once you have those small improvements, you can say I am making progress. One of the key motivations I had was to improve the work With his long time friend and successor Hani Abdulaziz Hussein 13

13 Sultan played a pivotal role in establishing a crisis management centre and plan during the war to liberate Iraq. Seen here at the Crisis Management Centre. The former Deputy Chairman & CEO represented KPC at several local and international venues. 12 In hindsight, when you recall your beginning in the oil sector, did you ever foresee that you one day will become the Deputy Chairman and CEO of the oil industry in Kuwait? I would say that by the grace of God there were many elements of luck in my career and part of the luck was that many of the positions offered to me were actually refused by someone before me! When I Þrst joined KNPC in 1971 I was like any other young Kuwaiti not knowing what I really wanted but looking basically at the Þnancial package and KNPC offered me the chance of working in London in a very exciting area called international marketing dealing with the whole world. So for a young man that was a very exciting prospect and I must say I learned a lot in those early years. After that I requested to come back to Kuwait because I felt that I spent too much of my life outside of Kuwait in boarding school, university then working abroad. That coincided with my getting married so a new part of my life started then. Then as I progressed in the Company the main highlight was the formation of KPC in What is interesting is that the new set of EAMDs chosen for Marketing, were all very young compared to today s team. The average ages were so we had a major responsibility on our shoulders but thank God I can say that we all were able to mature in our jobs, and handle the responsibility. What challenges did you face when you joined KPC? When KPC was formed, we came from a comfortable environment at KNPC which was partially private and there was a strong commercial sense. Initially, we had some concerns that there will be many people from KOC and the Ministry of Oil joining us and whether they would blend well with the commercial culture and nature of those of us from KNPC. However, I think everyone believed that the creation of KPC was the right thing to do and it was very important for the State of Kuwait, because before KPC was formed you had a variety of activities in the oil sector following different strategies with no real interaction or synergy. So to create a new Corporation, KPC, as a State owned entity and to bring these activities under this umbrella created this unity for the Þrst time. It was the right decision and it also allowed people in our different companies to develop and to take on the different management positions in KPC as such. Becoming the President of KPI was a career milestone. Can you shed light on that phase of your career? KPI in a sense was a dream assignment. Because we had the authority to act, it was a very challenging position, and I was allowed to create the team. I could choose and recruit the people I wanted and it was a very professional atmosphere away from the politics and that was a very enjoyable place to work. KPI allowed us to create a very interesting and successful brand, which was the Q8 brand. The process of creating this brand was very exciting for us. How did you come up with the interesting and ingenuous Q8 brand? That was a very interesting story. We wanted a name which would have an indirect relationship to Kuwait and could be used internationally and not be necessarily very Arabic so we could market it across the world. We had already agreed that the logo should have some reference to the sea such as sails. All that was left was deciding on the name. Many names came up such as Dana which meant pearl in Arabic and in English was a name. Then we thought of the word Falcon but on the last day when we were supposed to Þnalise a name, some new names were proposed. Amongst the new names written on the paper given to us was Q8. When we went past it in the list of names and looked at it, the reaction that we all had was the same reaction, which was a small smile! We Þrst thought why are they putting Q8? What does it mean? But then when it clicked that it was an indirect way of saying Kuwait, that made us decide that was the name we wanted. We then asked them how they came up with this name and they replied that when Kuwait was under the threat of invasion in the early 60s, there was a programme on television on which somebody wore a T-Shirt which had Q8 on it and they remembered that while trying to come up with our new brand name. So that was the history of how we chose Q8. What was your most unforgettable memory of working in KPI? I would probably say two memories stand out. The Þrst was in Two weeks after we launched the Q8 brand we were sued by a major oil company for brand impeachment and what ensued was a stressful but challenging three months of active court cases in different countries in Europe. Thank God we won the case, but it was a very interesting learning experience in a European environment. To have won the case against one of the major oil companies was a very important success to defend a new brand that we believed so much in. The second was in 1990, which was the invasion of Kuwait. As we had an established head ofþce in London, we were able to help the Board of KPC regroup in London. And we then helped the executives from our sister companies in preparing their plans for their return, the Al Awda Project. From establishing KPI, and weathering the critical period of the invasion of Kuwait where you had a major role in managing the operations of the Kuwaiti oil sector from London, you were approached to take on the challenging position of the Deputy Chairman & CEO. Was this daunting in any way? When I was approached to take the position of Deputy Chairman & CEO, it was a very difþcult decision to make and I consulted with all my colleagues as well as Hani. It was felt that at that time it was important for someone from the oil sector to take the position as the names being proposed were from outside the oil sector. DeÞnitely, what made it a difþcult position was the fact that it is a high level job and the success of the job depended on the relationship with the Minister. I had the privilege of working with six Ministers. You have to respect in this position that every Minister has his own style and his own vision and you have to build a working relationship with each one. The Deputy Chairman & CEO s role is to be that continuity between the professional side of the oil sector and to help the Minister and to gain his support to implement the vision and commercial aspects of KPC. That s where you have the challenges to the extent that the Ministers change. I am hopeful that in the case of Hani there will be continuity in the position of the Minister,

14 Al Khalid with some of the local press editors and Kuwaiti businessmen By: Dhary Al Jarallah Latest statistics place China as the second largest oil consumer in the world after the USA. Oil experts predict that the demand for crude oil and oil products will grow at an astounding rate during the next few years spurred by the huge increase in foreign investments in China after the government decided to open its markets. Reports indicate that China produced approximately 2.4 mbpd of crude oil during the Þrst half of 2004 and imported approximately 3 mbpd of crude plus petroleum products. Thus, China s gross demand in the Þrst 6 months of this year was approximately 5.4 million barrels a day which exceeds Japan s approximately 5 million bpd. Japan currently maintains the world s second biggest economy and was regarded for a long time as the second petroleum consumer in the world after the USA which accounts for 20 million bpd, a quarter of the world demand. China is considered as a most promising markets for KPC as can be seen from the great efforts made by the Corporation to strengthen its presence in this huge Asian economy. The Chinese markets also hold bountiful opportunities for Kuwaiti investments. Recognizing the great economic and investment importance of the Chinese giant, His Highness the Prime Minister, Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah recently paid an ofþcial visit to China and the Far East to strengthen existing cooperation in the oil sector and to explore potential additional cooperation prospects for the future In an interview with KPC World magazine Sheikh Talal Al Khalid Al Sabah-Managing Director petroleum Services, afþrmed the remarkable success of the visit of His Highness Sheikh Sabah Al Ahmad and the accompanying delegation in opening a new page of cooperation in the petroleum Þeld between Kuwait and the Asian countries, noting in this respect the great efforts made by the Minister of Energy Sheikh Ahmad Al Fahad and the accompanying petroleum specialists to open new horizons in petroleum investment with China, Japan, South Korea and Singapore. With regard to the success of the endeavours in the Chinese market, Sheikh Talal said that the Minister of Energy, Sheikh Ahmad Al Fahad met the President of the Chinese State Development and Reform Committee, Minister Mackay in Beijing and discussed relations between the two countries, particularly in the Þeld of petroleum, expressing KPC s willingness to invest in China, not only in the Þeld of crude oil supply, but in such other areas as oil reþneries and petroleum products. The meeting, he said, witnessed a discussion of Kuwaiti oil supplies to China and cooperation with Chinese companies in this Þeld. Sheikh Talal Al-Khaled added: The visit to China provided a most convenient and timely platform for discussing the possibility of establishing a joint standing committee headed by Minister Makay and the Kuwaiti Energy Minister, in order to carry on talks between both sides and achieve results that would optimize beneþts for both countries. He also noted that as Kuwait seeks to open new markets for its petroleum products and to push investments in petroleum and related Þelds, China and other Asian countries constitute Sheikh Talal Al Khalid Al Sabah 15

15 TALAL AL-KHALED EMPHASISES KPC Directs its Attention to the Chinese Giant 14 THE TALAL AL-KHALED REMARKABLE EMPHASISES THE REMARKABLE SUCCESS SUCCESS OF OF KPC S EXPANSION PLANS FOR CHINA KPC S EXPANSION PLANS FOR CHINA

16 We have also looked into the possibility of forming a permanent committee, consisting of KPC and Chinese ofþcials, to pursue discussions that would lead to better results. KPC is seeking to open new markets for its oil products to push forward investments in the oil and related Þelds. We have expressed to our Chinese counterpart Kuwait s wish and readiness to invest in China, not only in the Þeld of crude oil supply, but also in the oil reþneries and oil products industry. We also announced Kuwait s readiness to participate in infrastructure projects with Chinese companies. What subjects were discussed during the meetings with your Chinese counterpart? Several issues were discussed during our meetings. We both believe in the necessity of developing this relationship to beneþt from mutual interests and implement all matters that will be mutually beneþcial. A notable outcome of these meetings was the signing of an oil and gas cooperation agreement between the Government of the State of Kuwait and the Government of the Chinese Republic under which the two parties will encourage and promote cooperation between their respective national companies for provision of crude oil and petroleum products to the Chinese, in addition to working in production, explorations, transportation and logistical storage and facilitating cooperation in the exchange of information, and technical and technological expertise. 17

17 16 Chinese Minister welcoming Kuwaiti delegation a great market with tremendous investment opportunities. Sheikh Talal added that the Minister of Energy had issued instructions for the formation of a committee to consolidate the success of the visit; to follow up prospective projects, to study and evaluate and follow up the investment results and offers and to strengthen cooperation opportunities in the Asian countries visited. In the following interview, Sheikh Talal Al Khalid highlights the results of the tour and KPC s expansion plans in China What is the outcome of the ofþcial visit paid by H.E the Prime Minister, Sheikh Sabah Al- Ahmad to the Far East? Sheikh Sabah s visit has laid the cornerstone for serious relations with all Asian countries that the visit included and especially with China. Currently, China enjoys a strong international standing that qualiþes it to become a major player in the new economic order. Another element, which makes China a very promising market, is the rapid growth Al-Khalid in an ofþcial meeting rate in its economy. The aim of our visit was to explore the possibilities of investment there, especially in the oil sector. Discussions held in China between Sheikh Sabah and the Chinese President focused on Kuwait s quest to promote comprehensive development of bilateral relations in politics, commerce and economy and to invite Chinese companies to operate in Kuwait and the Gulf and take practical steps to achieve such development. Why is the Chinese market that important? China is the most populous country in the world and the second consumer of energy after the United States. It is also an oil and gas producer. However, since the early 90s, because of its increasing growth rate, China has been consuming a large part of its production and importing additional quantities of crude oil and petroleum products to meet its daily needs. It also relies on coal as a main source of energy. The Chinese market is important to us, particularly in relation to crude oil products. According to studies, China will have the largest share in any future increase in global demand for crude oil. In 2003, China s with Sheikh Ahmad Al-Fahad at a dinner banquet in China consumption increased by half a million barrels a day. This high demand has encouraged many oil producing countries and oil majors to enter the Chinese markets and increase their share there. China is also a large consumer of jet fuel. Additionally, there is strong demand for gasoil. In 2003, China consumed around 80 million metric tons of gas oil and imported 3 million metric tons. These quantities will double in the future as a result of increased use of gas oil in transport. We also expect an increase in demand for liqueþed gas, which is an environmentally friendly product and is in compliance with the World Trade Organization speciþcations to rely on cleaner sources of energy. The International Marketing Sector succeeded in entering the Chinese market through the conclusion of contracts with global oil companies such as Shell and BP. What can you say about these agreements? According to this new vision, the International Marketing Sector, under the leadership of the Minister of Energy, Sheikh Ahmad Al- Fahad Al-Sabah, has been seeking to seize the available opportunities and expand our market share in China. If economic growth in China continues as expected, consumption will increase to around 10 million barrels a day in the next decade, which will create a fertile ground for Kuwaiti oil investments. Such investment requires the provision of new and advanced mechanisms of cooperation between the two sides. It seems that this will be achieved as the result of the signing of a framework agreement between China and the Gulf Cooperation Council States, providing for the promotion of investments and the development of commercial, administrative and technical relations, which will allow the start of new and serious negotiations for the setting up of a free trade zone between China and the Gulf States in the future.

18 Maintaining accounting records according to international standards, Delivering Þnancial and management reporting, Reviewing operational and capital expenditures, Ensuring compliance to governmental and legal requirements in all Þnancial activities, Communicating with governmental and legal authorities regarding Þnancial matters, Providing an effective Corporate Financial Risk Management, and Providing special expertise in Tax Management. To realize this vision and fulþl our mission, several initiatives are necessary to achieve substantial improvements, including detailed recommendations for process optimization, organizational restructuring & IT support. In addition, a future oriented capability analysis within our Finance Group was executed to identify training areas. What are the requirements to ensure the success of this plan? To ensure the fulþlment of our vision and mission and to carry out all these initiatives, an implementation plan was developed. This plan describes the necessary tasks in detail and the parties responsible and the timetable. These initiatives will be accomplished over a period of 3-4 years with the major activities scheduled for completion in The success of the implementation plan requires the employees active involvement and commitment to the change process individually and as teams working together to improve the Þnance function performance. 19

19 التطبيقات المالية KPC RESTRUCTURE لتهقيق ا فض ل Seham Razzouqi CORPORATE FINANCE FUNCTION In an initiative aiming to upgrade work practices and procedures, KPC undertook a vital project to restructure the corporate Þnance function and develop a strategic plan for the coming years. From March until July 2004, a project team consisting of KPC Finance Group and Accenture developed the plan entitled Corporate Finance Function Strategic Plan. Competency Management: Evaluate skills & capabilities and formulate future requirements by using the existing competency based system IT Excellence: Examine the existing Þnance IT application infrastructure and the necessary future requirements together with the development of a to-be IT landscape based on Oracle. Provide excellent Þnancial services for KPC sectors & subsidiaries, Manage KPC s Þnancial assets and risks ef- Þciently, Set Þnancial guidelines and policies for KPC Group, and 18 With regards to the purpose of the strategic plan, Ms. Seham Razzouqi former Managing Director for Finance, Administration and International Relations said it was both to identify and to prioritize the most promising best Þnance practices across the corporate Þnance function at KPC, leading to optimal support structures and optimal processes within the Finance Group, which will be an essential factor for the success of KPC strategic direction. In the following interview Ms. Razzouqi sheds light on the project and its objectives. How was the strategic plan developed? The plan was developed in four integrated work streams: Strategic Repositioning: Review and develop the corporate Þnance s vision, mission, organizational structure, and performance management Process Optimization: Analyze and optimize corporate Þnance functions based on an overall KPC process model What was the vision statement of this initiative? Our vision statement is as follows: We aspire towards being the strategic Business Partner, the leading Financial Service Provider as well as the acknowledged Guardian of corporate Þnancial interests within KPC Group, focusing on high performance by adding value and delivering high quality work in a timely manner. The foundation for our success is world class Þnancial expertise in combination with deep business understanding and commitment to respect for the individual, professionalism, teamwork, integrity, and customer satisfaction. And the Mission Statement is the following: As Business Partner, Financial Service Provider, and Guardian of corporate Þnancial interests, our purpose is to Proactively participate in decision making, Provide accurate and precise Þnancial information ensuring high level of transparency. We are consequently contributing to KPC Group s corporate goals by maximizing our contribution to shareholder value, supporting others achieving their contribution to shareholder value, and developing best people. What is the scope of activities of the Finance Sector? Our scope of activities is deþned as: Supporting business decision making, Leading Þnancial planning, Managing KPC wide Þnancial performance, in collaboration with the business units, Ensuring necessary funding sources and shape KPC s capital structure, Managing surplus funds and working capital while ensuring liquidity,

20 Jamal Al-Nouri The deal included other assets in the British market, such as the diesel Þlling stations as well as wholesale operations and the accompanying logistic services including tanks, loading ports and the Company headquarters in Staines. Were any other KPI assets included in the deal? The deal was limited to the aforementioned and did not include other KPI activities in the UK. We will continue to operate the Q8 Aviation fuel sales operations which serves different UK airports: Heathrow, Gatwick, Stansted and Manchester, the lubricating oils activity based on the state of the art lubricant blending plant in Leeds and the International Diesel Service (IDS). Some people have suggested that selling the service stations in Britain might affect the other KPI activities in Europe, what is your response to that? It is important to understand that selling our retail stations in Britain is not indicative of a decision to shrink our activities in Europe. On the contrary, KPI continues to strengthen and consolidate its presence in the other European markets, where it is at par with other leading oil companies. KPI is committed to providing customers with high-quality products and to offer the best services for its clients in these markets. It is worth mentioning that KPGB was established in 1986 when Kuwait Petroleum Corporation, already one of the world s largest integrated oil companies, decided to enter the British market. The company grew and consolidated its presence through organic growth and the strategic acquisition of companies with retail service stations such as Ultramar Golden Eagle, Nafta and the Hays Petroleum Group. The company strengthened its activity in the direct wholesale market in the British market through buying the activities of the BP Company in the centre and South of the UK. The head ofþce of KPGB is at Staines, Middlesex to the west of London. Its major distribution facilities are Ross Chemical and Storage Terminal in Grangemouth, Scotland and Kings Lynn Terminal in Norfolk. The company has 8 storage locations with the Fuel Care trademark to serve the direct company sales. The company s wholly owned distributors are strategically located throughout the UK to provide a friendly, efþcient and knowledgeable service to local customers. KPGB used to own, before the deal, 75 Þlling stations and supply 200 other stations having the Q8 trademark and had 600 working employees. Our purpose built lubricants blending plant in Leeds will continue to operate under the management of Kuwait Petroleum International Lubricants. It has been reported in the press that KPI will market Kuwaiti products through its retail stations in Europe. Can you tell us something about this? An agreement has been reached with Kuwait s Public Industrial Authority to launch a campaign to market national industrial products in Europe. Denmark will be the starting point and then the campaign will include our other retail stations throughout Europe. The Public Industrial Authority will shoulder all the expenses as well as ensure the fulþlment of any legal procedures and issue the needed certiþcates to comply with Denmark s requirement for cooperation with the Kuwaiti plants. A joint working team will be formed to discuss and execute the plan of the marketing campaign. The campaign aims to market Kuwaiti products abroad and to upgrade the quality of the locally manufactured products as well as attracting direct foreign investments. The campaign is considered as the Þrst step towards implementing plans of the Export Development Centre established by the Authority and is supported with a budget of KD 1,5 million to ensure its success. 21

21 To maintain Economic Status KPI Sells 75 stations in Britain HANDSOME PROFITS ON UK ASSET SALES Following a strategy review of all its downstream activities, Kuwait Petroleum International has recently sold its UK retail service station network and direct fuel distribution services so as to concentrate on more proþtable areas of business. leum Great Britain Ltd (KPGB), which includes 75 petrol stations. This move was supported by the management of Kuwait Petroleum Corporation. Consultation house Ernst & Young acted as exclusive Þnancial advisors to KPI in the selling process. with strong recommendations to focus on profitable markets, which ensure steady proþts for the company. Since our assets in the British market were small, it was not considered as a major market for KPI. Thus we decided it would be wise to sell our investments there. 20 Kuwait Petroleum International (KPI) marketing strategy focused on consolidating its business in lucrative markets and disposing of assets in which the company has scale to stand the challenges in markets such as UK market. The decision was based on strong recommendation of all studies conducted to focus on proþtable markets and since KPI s share in the UK markets was small it was not considered as a major marker. In pursuit of this strategy KPI decided to sell assets in its subsidiary company, Kuwait Petro- To shed further light on the sale and its effect on KPI s standing in Great Britain in particular and Europe in general, KPC World met Mr. Jamal Al Nouri former KPI President and Chairman of Aruba s Board of Directors. He afþrmed that the company was prudent in selling the 75 stations and realized good proþts from this deal. What were the reasons behind selling KPGB? The decision to sell our assets in the KPGB was the outcome of extensive studies that concluded Who bought KPGB s shares in the British market? The deal was awarded to the private UK-based company, Malthurst. which already owns and runs 110 gas service stations. The company was looking to enhance its market share in the British markets, and the deal will help Malthurst boost its stake in the British retail market to 250 service stations.

22 By Maryam Al-Ateeqi Kuwait Oil Tankers Company (KOTC) has ushered in the third millennium with an ambitious project to update its ßeet in synergy with the international marine speciþcations and environmental standards. The unique project will ensure that all new tankers will be compliant with all international standards and will fulþl KOTC s objectives to remain a regional leader. KOTC has recently begun implementation of the plan for the upgrading of its oil tanker ßeet and replacing its single hull tankers by signing contracts for the building of seven new tankers of the latest speciþcations with Daewoo and Hyundai companies. According to the agreements both companies will build 7 oil tankers in total. The Þrst contract with Daewoo covers the building of one AFRAMEX oil tanker of 114,000 tons capacity, to carry oil products, and two PANAMAX of 69,000 tons capacity each to carry oil products. Hyundai Company will design, build and hand over four tankers to KOTC: two Very Large Crude Carriers (VLCC) of tons capacity and two Very Large Gas Carriers (VLGC) of cubic meters capacity for carrying ammonia and liqueþed gas. KOTC owns only two double-hulled tankers. The standard of the company in this respect is lower than that of other tanker owners in the Middle East and around the world; an important factor in forcing KPC to proceed with the company plans to upgrade the ßeet. The signing of the contracts is regarded as a major achievement and a positive progress in upgrading the company ßeet. Replacing the old ships will, in turn, open new horizons and pave the way for a prosperous new future for the Oil Tankers Company, increase the general efþciency and performance of the company, and strengthen opportunities for competition on global markets. Undeniable, the international oil transport industry is facing a great challenge in implementing the stringent HSE standards protecting the environment from pollution and oil leakage. Because of the strict laws related to marine environment protection, there is an increasing demand for modern double hulled tankers, which has kept the lease prices of tankers high during the year. The company is also facing many challenges. The cost of building new tankers has risen to the highest levels during the past ten years because of the continuous increase in steel prices resulting from the global economic revival and the huge demand in China for steel for its construction and manufacturing industries 23 Abdullah Al-Roumi KOTC Chairman at the contract signing ceremony

23 22 KUWAIT OIL TANKERS COMPANY TO BUILDS 7 MODERN OIL TANKERS

24 Other improvements will be made in the safety and security procedures. On 1st July, the ISPS law was implemented. This law, enforced after the events of September 11, require a ship to have automated systems so that, for example, in the event of an attack by pirates, an alarm signal will be emitted to the ports, a service to which the ship has subscribed. There are also a number of guidance booklets printed for each ship. What is the total cost of the project? Approximately, $560 million dollars. Any Þnal word at the end of the interview? Mahmoud Ghalloum Abdullah quantity of oil and pollutants in the wastewater in view of the increased risks with gas storage. poured into the sea and automatically prevents Smoking and lighters or even the use of wireless sets are strictly prohibited and equipment more than the permitted quantities to be discharged. This is part of our plan to preserve the that generate electric charge. To combat Þre, environment. small Þre extinguishers are not used for Þre Þghting. There is a room of carbon dioxide cylinders. In the event of a Þre breakout, the CO2 As regards Þre precautions, Þre alarm systems and Þre Þghting equipment have been installed is released and covers the machine room and on the ships. Gas ships are maintained the most other machinery and equipment. Details of the new tankers First of all I would like to thank HE Sheikh Ahmad Al Fahad Al Sabah the Minister of Enetgy, without his prompt approval this project would have been further delayed and harmed the oil sector and the State of Kuwait. He is a man of integrity and took this decision based on the general good and for the beneþt of the State of Kuwait. Kuwait without an advanced and modern ßeet would not have been able to fully realize its potential and utilize its oil wealth. I also wish to thank Sheikh Salman Al Sabah for his valuable contribution to ensure the success of the project. The importance of building the new tankers may be summarized in the following: Tanker Type Number Weight Company Delivery Date Cost per tanker To obtain a strategic national cargo for the State of Kuwait-Kuwait Petroleum Corporation. VLCC HHI Hyundai Korea April 2006 September To replace the tonnage of very old and single-hulled ships with modern doublehulled ships. To achieve more support for the ßeet. VLGC HHI Hyundai Korea May 2007 January To create and improve job opportunities for Kuwaiti citizens. To prevent the loss of public funds to third 25 AFRAMAX (LR-2) PANAMAX (LR-4) DSME DAEWOO Korea DSME DAEWOO Korea March June 2007 September parties i.e. other countries. To achieve commercial beneþts from the rise in the leasing market. To achieve and preserve the good reputation of the company in the light of industrial expansion and competition on the global market.

25 It should be noted that KOTC was amongst ers. Could you throw any light on the reasons Shaqaia and Al Salhia, built in 1998 are compli- the Þrst to be awarded quality and safety cer- why KOTC needs to renew its ßeet? ant to all international laws. tiþcates, locally and internationally. The Fleet Operations Department received the two Safety Management and Management Quality CertiÞcates in 1997 and the Green CertiÞcate from the Netherlands in Recently, the Fleet Operations Management Department renewed the international safety management certiþcate, ISM-Code and updated the ISO Quality Management CertiÞcate At a time when there is a rising international trend to preserve the environment KOTC has only two double hull tankers that comply to international standards. Therefore, we are lagging far behind from our counterparts both in the world and regionally. This was a cause a matter of concern considering the status KOTC had enjoyed in the last decade was one of the 5 leading oil tanker companies in the world. What will happen to the single- hull ships currently used? Upon completing 25 years in service, they will be put out of service. Some will be put on the scrap market. With time, it becomes impossible to beneþt from the leasing of these ships. What beneþts will the company reap if the ships are sold on the scrap market? 9002:1996 according to the latest regulations and the most strict requirements of ISO 9001: 2000 by the International Rating Organization DNV. The KOTC liqueþed gas cylinder bottling plant was awarded the ISO Management Quality CertiÞcate 9001:2000 in January of this year. It became imperative update our ßeet and build double hull tankers. After several studies, this issue was taken to the KPC Board and we availed the necessary approvals. The new tankers will be built according to the speciþcations of KPC and KOTC. The new tankers will be state of the art, will have all the safety and There is a minimal beneþt but that this depends on the size of the ship and thus the quantity, as well as the price, of steel at the time. What are the safety and security methods currently used? Are there new methods that will be applied in respect of the tankers? 24 With regard to the upgrading of the ßeet, KPC World magazine met with Mr. Mahmoud Ghalloum Abdullah, Manager Fleet Engineering and Projects Group who focused on the main aspects of the project. KPC s Board of Directors has granted its approval to the upgrading of the Kuwait Oil Tankers ßeet with the building of seven new oil tank- security features, and will be environmentally friendly and have long durability as they are built to last at least 20 to 25 years. How many ships does the company own at present? Presently we have 22 tankers and two Bunker Ships that carry crude in the Kuwaiti territorial waters. Of the 22 tankers, 5 are gas carriers and we have 8 double hull tankers but only two Al We have been awarded safety and security certiþcates from international rating companies who conduct periodic inspections of all matters relating to safety and security which include measurement of the quantity of black smoke emitted by the ship and carry out regular maintenance to preserve security. We have also purchased equipment for burning waste on the ship. The equipment measures the

26 Asaad Al-Saad two units are technologically advanced and enable further reductions to be made in the sulphur content of reþnery products to meet the requirements of the company s strategic plans to reduce environmental pollutants. The reactors, regarded as the largest and heaviest in the world, were designed by the US Chevron Company and manufactured by the Japanese J.S.W. Company. They are made of vanadium and solid steel and together weigh around 2,500 tons. The new technology allows sulphur to be extracted from our oil products much more ef- Þciently and with less effort. It also increases the life of the catalysts inside the unit from the months, as previously, to months, which results in an expected increased productive capacity per unit of 18,000 bpd from 66,000 bpd to 84,000 bpd. The end result is reduced catalyst costs and a high-quality and value product. We faced many obstacles and hurdles in building this project, but, Thank Allah, we overcame them all. The main obstacle was to transport the reactors from Shuaiba Port to the site and install them next to the reactors operating under high pressure and temperature. Each reactor unit weighs 1250 tons, is 60 meters high and 6 meters in diameter and was to be installed only 3 meters away from the operating units. We succeeded in performing the project thanks to good preparation by the Projects Department of the company, a thorough follow up of the work details by personnel at all employment levels and assistance from the LG and MAM- MOET companies who, together with the personnel at the reþnery, carried out risks assessment studies and made recommendations to reduce the risks and guarantee the success of the project. The LG Engineering and Building Company and MAMMOET Company worked together to transport and construct the two reactors. The largest crane in the world of the MSG type was brought for this purpose. The main objectives of building this unit can be seen in the light of the strategic studies carried out by KPC with KNPC on future expectations of global market demand for low sulphur heavy fuel to preserve the environment, in application of the new environmental laws. For these reasons, we need to apply the new speciþcations in respect of sulphur quantities in our products so they become environmentally friendly. The State of Kuwait will meet the demand of global markets for products free of environmental pollutants. Thus, we will achieve the strategy of the corporation and company at the same time. Regarding the environmental aspect of this project, Kuwait has ratiþed international treaties, including the Basel Convention and the Kyoto Agreement. Under these two agreements, signatories are bound to implement certain environmental measures. To beneþt from this new understanding, the State of Kuwait is closely following up these legislations, as well as all subsidairy companies operating in the Oil Sector, including of course KNPC, which is committed to them. In future, these laws will have a large impact both on the consumers of our products and us. And since petroleum is the main source of income for Kuwait, KNPC has adopted the environmental management system that covers all the international laws or those laid down by the Kuwaiti Environment Public Authority, which we call the environmental management system. This reveals the effects on the environment and sets the controls for curbing such effects as much as possible. And since the environmental management system is a very complex and sensitive subject, I hope to address it in a future meeting to throw more light on this system that is important to us and to our precious environment he concluded. 27

27 MINA ABDULLAH ADD SULPHUR EXTRACTION UNITS 26 By Dhary Al Jarallah The success of an oil reþnery is linked to its ability to become technologically advanced and its abidance by international rules and regulations in force. The oil industry in particular has great inßuence on global economies and the environment. It is no longer a national industry of a single country, but an integrated global industry in which the exporter relies on the consumer who is on the lookout for a new product that does not affect the environmental and economic interests. This is what ofþcials in charge of the reþneries business in the State of Kuwait have observed. They laid down strategic plans and programs to accompany these global developments. The results are emerging now. In a few days, work on the development of two new sulphur extraction units at Mina Abdullah will be completed, using new advanced technology that will enable us to replace the assistant worker during operation. The total cost of this project is KD50m. In an interview given to KPC World Magazine, Engineer Asaad Ahmed Al-Saad, General Manager of Mina Abdullah ReÞnery, spoke about the new sulphur extraction units, a unique and vital project in the region on the technological level, about the obstacles faced during the implementation of the project and the advantages of this technology and how it serves the future goals of the Kuwait oil industry. Al-Saad said: With regard to the historical development of Abdullah Port reþnery, the reþnery was set up by American Independent Oil Company, AMINOIL in It was upgraded between 1962 and 1967 with new units for the extraction of hydrogen and sulphur from oil. In 1978, the company was acquired by Kuwait National Petroleum Company (KNPC), a subsidiary of KPC. The reþnery was upgraded again between 1982 and 1988 with the addition of several advanced units, such as the hydrogen breaking unit, the hydrogen treatment unit and other sulphur extraction units for preserving the environment. Today, Abdullah Port reþnery is an integral part of the KNPC reþning complex along with Al Ahmadi Port and Al Shuaiba reþneries. The main function of a reþnery is to produce petroleum products such as gas, liqueþed and jet plane gas used in the production of gasoline and kerosene which are both used as lighting and aircraft fuel, and the production of diesel used in trucks and public transport, as well as heavy fuel oil usually used in plants or power production plants and other petrochemical industries. Abdullah Port ReÞnery is the only reþnery in the Middle East with a unit for producing petroleum coal which is used in the operation of plants and the production of energy in many countries. The reþning capacity of the reþnery is 270,000 barrels a day, covering its share of such products in the global markets, which amounts in general to 900,000,000 barrels a day. Work on the sulphur extraction units project started 22 months ago, with commissioning of the units due two months from now.. The

28 Abdulaziz Al-Dousari and Khalid Al-Obaid What role did you play in the organization of this major oil event hosted by KPC? I was nominated as general coordinator of the different departments of the Corporation to make the necessary arrangements for a successful conference. I would like to praise the cooperation received from the different departments and the team spirit that cleared all hurdles and enabled the organization to be completed in record time. The team from the Market Research Department mobilised all efforts and worked hard to make the conference succeed. I would like to praise Khalad Al-Obaid, Abdullah Al-Shatti and Jaber Al-Hajji who played a major role in colleting data and preparing lectures during the conference sessions. I also thank Mrs. Maha Al- Ashmar for her key role in printing all the data at the required speed and quality. When and why was the Marketing Managers Committee formed? Since the Gulf region has large oil reserves and reþning capacity and is therefore a vital exporter of various oil products to global markets, and in view of the importance of the oil sector in the GCC economies, this committee was set up in 1983 upon the recommendations of the oil ministers. Accordingly, several annual meetings are held with GCC marketing leaders, ofþcials and competent persons to achieve coordination, cooperation and the exchange of experience in many Þelds, such as the markets on which the petroleum products are put, the customers and the conclusion of contracts with them. The pricing formulas for the different petroleum products are also discussed with the aim of guaranteeing fair prices for both seller and purchaser as are the sales contracts between oil companies and purchasers. Crude oil was added last year by the oil ministers considering the importance of its being included in the coordination SpeciÞc programs are drawn up to cope with the oil market developments and factors, which take into accountthe actual competition among companies in the Gulf region, in such manner as to protect the interests of each country. What are the accomplishments of the committee? Over the years, the committee s many accomplishments include: - An improvement in teamwork and establishing contacts at all levels in the GCC countries. - Becoming acquainted with and studying the pricing formulas of the Gulf countries and achieving similarity between them. - Exchanging information and giving attestation about customers and any experiments with them. - Exchanging information about future plans for reþneries and production of petroleum and liqueþed gas products for pre-coordination. - Finding a common ground for understanding the different markets of all the products. - Following up and coordinating changes in the speciþcations of products. - Exchanging experience in e-commerce and its possible use in the region. - Achieving coordination among companies with regard to marketing crude oil and petroleum products within the framework in a global marketplace, - Exchanging views about any future plans for development of products, reþneries, ports and other factors contributing to raising productive efþciency. Abdullah Al-Shatti First analyst-marketing Research Department As I was new at the Corporation, it was my Þrst participation in a specialized oil conference of this kind. I was entrusted with preparing a short lecture on the volume of oil exports in the Arabian Gulf. I felt a little apprehensive but the feeling disappeared quickly after I attended the conference. I acquired considerable experience from my participation in the conference. It gave me a comprehensive perspective on the oil industry and got me acquainted with the marketing ofþcers with fellow Gulf companies. We exchanged experiences and viewpoints that were of beneþt to me in my work. Jaber Al-Hajji Marketing Research Department My main role in the conference was to prepare and give a lecture on oil products and future expectations about the development of the Gulf oil products and exports industry. There is no doubt that I beneþted very much from the conference. The nature of our work requires us to peruse all oil reports and information on a daily basis. However, the additional insights presented at the conference sessions yielded more beneþts. I became closely acquainted with the oil trends of the Gulf States and beneþted from the in-depth seminars. There was complete harmony among all the members. Clear objectives were set for making the conference a success. There was transparency in dealing and full agreement on the importance of unifying the Gulf efforts to deal with international competition. The oil analyses reßected the actual state of affairs in the Gulf and global oil markets. We hope to retain this positive attitude that will surely enable us to face all challenges. 29

29 28 By Sheikha Al-Tourah Dhary Al-Jarallah Earlier this year, KPC hosted the 27th Gulf Cooperation Council National Petroleum and Gas Companies The meeting was attended by representatives of all the member states national companies. Lengthy discussion followed on from the many technical reports submitted by the companies, and a good deal of marketing information and experience in coping with the seasonal developments and changes in the markets was exchanged. UNIFYING EFFORTS OF GULF OIL COMPANIES Maha Al-Ashmar In conclusion, the Marketing Managers Commitee adopted the following proposals. 1) To form teams specializing in the marketing of the different company exports, from crude oil down to petroleum products. Such teams will me made up of people with the relevant area of competence for each product to promote cooperation and integration and the exchange of information among companies in oil exports, and support them in negotiation with consumers. The teams will be authorized to make all necessary decisions and actions to achieve the interests of the companies. 2) To increase contact between the companies marketing departments and exert greater efforts to clear obstacles to performance and completion of the target sale and purchase operations among the GCC states. 3) To exchange information in support of the GCC states appraisal of the performance of medium traders and the extent of their abidance by contractual and Þnancial conditions. 4) To follow up of the developments of the Indian and Chinese markets where there is growing demand for crude oil and reþned petroleum products and to submit reports before the end of the second, third and fourth quarters of the current year, taking all measures to minimise excessive competition among companies. At the close of the meeting, the participants expressed their deepest appreciation to Kuwait Petroleum Corporation for hosting the Committee meeting and their warmest thanks and gratitude to its delegation for their warm welcome, their hospitality and the excellent preparation for the meeting. They declared that they had reaped immense beneþt from the deliberations and the transparency in the exchange of information and experience, In particular, they expressed appreciation of the Committee s presentation and analysis of the global crude oil and petroleum products markets and concluded by saying that the meeting would do much to promote cooperation among companies in the marketing sector. To learn more about the Conference, KPC World magazine met with some of the KPC staff who contributed to its success. First we spoke to Mr. Abdul Aziz Al-Dousari, Market Research Department, who was an active member in the Conference Coordination Committee.

30 KPC s Petroleum Training Centre is one of the key organizations concerned with developing the skills of oil sector employees. The Centre gives them the skills they need to perform their duties both efþciently and effectively, thereby increasing their productivity. It is also a gateway for newcomers to this vital sector. The Centre s premises have recently been upgraded and a new building added at a cost of KD 2.2 million. The Centre received three international quality certiþcations within one year and provided training to nearly 11,000 participants last year. In recognition of the importance of its role within the Oil Sector, KPC WORLD conducted a series of interviews with the Centre s ofþcials at its premises in Ahmadi in order to gain a better insight into the nature of their work, the new training programs and the plans for this coming year, following the start of its operations in August. Riyadh Al-Yaqout, Executive Assistant Managing Director for Training stated the Centre s mission as being to prepare, qualify and develop national manpower in order to build up a well-trained and qualiþed work force that is capable of assuming responsibility for the work, improving standards and carrying out all the required works to a high level of efþciency in all areas associated with the oil industry and its supporting activities. Al-Yaqout said that since completion of the Centre s renovation and construction of an additional building, Kuwait now has a worldclass petroleum training centre. The training environment features state of the art technology, Al-Yaqout: Our mission is to prepare, qualify and develop our national manpower to be able to assume responsibility for this sector software and training facilities and the capability to organize both specialized courses to qualify personnel and to improve the level of human resources in the oil sector in terms of performance, quality and quantity Concerning the vision and strategic goals for training and development in the oil sector, Al- Yaqout said that it is represented by several points, foremost among which is the creation of a petroleum training centre to meet the training needs of KPC and its subsidiaries, putting in place modern uniform training and career development systems for the entire sector, achieving integration with other training and education bodies and activating their role in improving the training and development activities. Technical Training Al-Yaqout added that the aforesaid points have several underlying work points, mainly: Establishing communication with similar regional and international centres in order to exchange experience and measurement for the purpose of developing the business. To provide basic training and development programs for all management and functional levels, To develop the centre as a scientiþc point of reference for information and data, a highly regarded education and training institution recognized at the regional and global level capable of partially Þnancing its operations on a purely commercial bases, To create an institution that provides a link between training and career development objectives and manpower policies and plans, thereby Þlling the gap between the level of the job and the level of the employee, The alignment of the training output with the needs of the oil sector, thereby increasing the efþciency and value of the national manpower in the eyes of the oil sector contractors. Technical Training The Technical Training Coordinator at the Centre, Bassem Al-Essa, is responsible for preparing both long and short-term training programs for Þeld operators. The programs focus on four major areas: engineering and maintenance, operations and operating, drilling and exploration, and security, safety and the environment. He said that the most recent course is for training secondary school graduates to work in the security and Þre Þghting sectors. He said that the Centre has petroleum training workshops that include rotating instruments Riyadh Al-Yaqout workshops, operations, machining and iron works and electricity and instrumentation, as well as a chemical laboratory. He added that one of the key features of technical training developed over the past two years is preparing the trainees for specialized courses that award internationally recognized certiþcates, which in turn allow the trainee to obtain further international certiþcates. Al-Essa: Our objective is to increase the return on training and maximize benefit from the training programs Al-Essa added that the Centre s principal objective is to ensure a higher return on the training for the trainees. He noted that it is sometimes difþcult to guarantee that trainees really beneþt from the course because of the lack of means to measure a program s success. However, he added that the future success of the programs stems from our determination 31

31 30 PETROLEUM TRAINING CENTRE TAKES ON A NEW LOOK

32 A KD 4 million Operating Budget Nawaf Al-Qahtani said that the Centre s budget is divided into two parts. The operating budget of KD4m is related to the conduct and organization of the training courses and programs while the capital budget whose amount varies according to needs, is for capital projects such as the recent expansion. He stated that the Training Centre is Þnanced by the oil companies according to the extent to which each company beneþts from its services and the number of trainees participating in the training programs. services in November 2003, and obtained ISO 14001/96 certiþcation for environmental management and the ISO 18001/99 certiþcate for vocational safety and health in May There is a periodic internal audit of the Centre s work by a team of representatives of all Training Department sections and an external audit by international bodies every 6 months. Al-Qahtani emphasized that the three certiþcations fall within the integrated management framework, particularly because the Centre has certain training courses involving environmentally hazardous materials. The same applies in respect of the used tools. He went on to say that the Centre is in the process of issuing a manual for use by all the Centre s employees containing an explanation of and guidance with regard to these materials and the proper procedure that should be followed in the event of any emergency. On-going Development At the end of this tour of the Centre, Riyad Al-Yaqout emphasized that the development process at the Centre is an on-going one. He said that the Centre is now studying a project for expenditure at the level of the service and oil companies in order to identify their training needs and requirements and how these can be met by the Centre. The purpose was to identify a quality performance standard. In order words, the Centre continuously seeks certiþcates of excellence according to modern international standards. 33

33 32 Al-Saddah: Our goal is to reduce the time period of our programs... and we have updated our website to receive applications from training candidates. to ensure that all participants acquire an added value in their respective Þelds of specialization. He went on to say that, pursuant to the KPC directives that contractor manpower should be taken care of and qualiþed to work in the oil sector, this element has become a major focal point and that in the light of the plans to raise the proportion of Kuwaiti nationals employed with contractors to 25% of their manpower over the coming Þve years, there would be increased demand for training programs designed and implemented in coordination with KPC. General Training Ahmed Al-Saddah, General Training Coordinator at the Centre, said that the Section is responsible for all general training matters in addition to the work carried out by the Technical Training Section. He said that general training is concerned with training programs in administration, operations and self development, all of which enable trainees to perform their duties in a better way and at a lower cost. He said, for example, that the English training courses last 4 to 12 weeks. These programs are being re-structured in order to be more in line with work needs, whether ofþce or technical work. He said that the Section is responsible for supervising the computer training programs at the Centre, which have recently been updated through the main training centre. He said that the Centre s website has been renovated to accommodate on line technical modules. The website is also used to receive applications from individuals who wish to participate in the various courses offered, thereby saving considerable time compared with the traditional procedures. Work Mechanism The Training Specialist at the Centre Fauzi Al Qassar told us that the work mechanism at the Centre starts in June of every year. The Training Centre s objective in this process is to discover the requirements of the oil companies and provide the courses accordingly. A provisional plan is prepared on the basis of an analysis of the past plan and an appraisal of the program as a whole. This is then forwarded to the oil companies for their initial opinions and feedback. After studying their responses, training needs and determining the number of prospective trainees, the Centre prepares the training programs for the new year to meet all the companies requirements. Finally, the plan is issued with all the dates, objectives and organization of the programs. The Centre also invites the oil companies to propose new elements to be added to the training programs in the light of new developments or future requirements. Al-Qassar said that the Centre also receives applications from government ministries, the National Guard and the State Audit Bureau for training under certain programs. He added that the Centre is devising a mechanism to allow both the private and public sectors to participate in certain oil sector programs implemented by the Centre. Al-Qassar said that the Centre has increased its capacity from 300 to 830 participants per week (a 250% increase) in response to increasing demand for manpower and human resource development. Following the recent expansion, the Centre now has 44 training class rooms equipped with state-of-the-art training technology and 15 computer labs. The Centre organized 1,025 programs during the year 2003/2004 and served 10,699 trainees, compared with 566 programs and 5,363 trainees during the previous year. The Centre is expected to organize 1,600 programs during 2004/2005 serving 13,000 to 14,000 trainees. General Services The Superintendent of Administrative and General Services at the Centre, Mr. Nawaf Al-Qahtani, said that this Section provides all services to the Centre employees and trainees. These include building and equipment maintenance, training equipment maintenance, catering, cleaning and managing the Training Department s budget. He added that the section followed up the building of the new Centre, at a cost of KD 2.2 million. The building, which was handed over last December and commissioned last February, is equipped with modern equipment and occupies an area of 5,660 square meters. It has 30 training class rooms, 20 ofþces, and services facilities such as a car park for more than 750 cars. ISO CertiÞcation Al-Qahtani said that within one year, the Centre obtained three ISO certiþcations in recognition of the Centre s focus on providing quality services to the oil sector. It was awarded the ISO 9001/2000 quality certiþcation for customer Al-Qassar: We have upgraded the Centre s capacity from 300 to 830 participants per week and increased the number of classrooms to 44.

34 grow stronger as a person and an employee. I consider it a privilege to work with KPC and always enjoy learning about the Kuwaiti culture and the oil industry in general. I am sure that the following years with KPC will be as rewarding as the past years that I have been a member of this team. Sandy Dornak Administrative & Financial Affairs Celebrating the 10th anniversary of the KPC WH ofþce is an astonishing accomplishment for KPC as well as for myself. I have been fortunate to be a member of KPC WH since its inception in (From right) Sandy Dornak, Bader Al-Nisf, Tracy Kennedy and Mohammad Al-Hadlaq Hemisphere), Houston OfÞce. The ofþce is located in the very prestigious Williams Tower in the middle of the Galleria area. Houston was chosen since it is the centerpiece of the proþtable American oil industry supporting over half the city s two million jobs. KPC WH Þrst made its appearance in New York in September 1982 in the well-known Rockefeller Plaza. It was decided to move the operations to Houston Texas, the hub of the United States oil industry, in The port of Galveston, where a vast amount of crude is discharged, is located nearby and many crude oil customers are located throughout Texas. This makes it suitable for upholding close commitments to our US customers and for dealing with the time difference with Kuwait. Bader Al Nisf Working in the US allows me to be exposed to the day-to-day updates and activities of the US market. Unlike the time while I was studying here, working involves a lot of added beneþts such as getting to be more responsible. The fact that KPC-WH operating hours has no overlap with Kuwait headquarters makes it more difþcult to convey messages both ways. Tracy Kennedy Secretary I have had great experiences working for KPC (WH). I respect the great diversity and ongoing changes at the ofþce, which I feel has made me The knowledge and pleasurable experiences I have gained throughout the years have been very rewarding to me. I have been delighted to greet and meet many KPC delegates from the very different departments within KPC. I have become more accustomed to the culture and respect our similar but different ways of life. I was also very fortunate to have been able to meet and assist the dearly remembered Sheikha Sheikha Al Sabah during her harsh times in Houston. She was such an admirable person. We truly miss her. Throughout the past 10 years I have been able to work with many managers and colleagues who exhibited remarkable leadership and generosity. I will always appreciate my time with KPC (WH) and look forward to many more successful years with such a reputable organization. The Houston OfÞce focuses on maintaining relations with US customers and seeks to recognize potential business opportunities. The ofþce is close to the market and customers which is very useful for resolving operational and sales matters. Constant communication with KPC departments is essential and organizing reports pertaining to the US market and economy assists the operations of the departments within KPC. The Houston OfÞce continues to strive to be a successful afþliate for KPC. 35

35 KPC HOUSTON MARKS 10 TH ANNIVERSARY 34 In afþrmation of KPC s successful international marketing strategy and quest to consolidate its presence in key oil markets, KPC Houston OfÞce celebrated its 10th anniversary recently. Despite the fact that the United States is not a primary market for KPC, nevertheless the management of the International Marketing Sector at the Corporation felt it was important to establish a presence in the world s biggest oil consumer and to closely monitor market updates. KPC WH ofþce was Þrst established in 1982 in New York City as an afþliate of KPC to strengthen relation with American clients. Then in 1994 the ofþce was relocated to Houston, Texas which is known as the world s Oil Capital, and where many companies reside next to the rich oilþelds of the US gulf coast. KPC realized that having an ofþce there enables it to strengthen and establish relations with oil sector players in north and South America especially the former where oil consumption is the highest in the world. The ofþce also monitors regulations, legal amendments and government mandates related to the oil industry to see how they could affect KPC. In addition it also identiþes marketing opportunities to enable the Corporation to study their feasibility and advantages. In celebration of this occasion the KPC WH ofþce team express in their own words their feelings on this historical milestone. Mohammad Al Hadlaq Houston OfÞce Manager September 2004 marks the 10th anniversary of Kuwait Petroleum Corporation (Western

36 The couple s love and devotion to Kuwait has become almost legendary and their service to Kuwait and valuable contributions to its advancement are still remembered and appreciated. They developed and cultivated compassionate relations with Kuwaiti people. They were loved and respected by people because they treated them with respect and kindness, never looking down on their poverty stricken lives with disdain. It is not known exactly when their house was built, but many believe it was built in the 1880s for the Al Asfour family. It was then used as a British Political Agency to house the successive Political Agents who were based in Kuwait. When the Dicksons arrived the house was sadly in a very bad state of disrepair due to neglect and lack of maintenance and parts of the house were close to collapse. Old mud brick houses require special maintenance on a regular basis to withstand the harsh climate. To keep the house in good shape, it was important to scrape off the mud and lime plaster on the outside of the walls every Þve to six years. Since that had not been regularly done, the house needed major and immediate renovation work and so the couple hired a Kuwaiti-Persian master builder called Ahmed Abdulkhaleq Al Benna. By: Sheikha Al-Tourah The Dickson House represents an integral part of Kuwait s history and reßects age-old friendly ties with Great Britain and the close afþnity Dame Violet Dickson with her son Saud Kuwaiti people felt with Colonel Harold Dickson, the British Political Agent, and his wife Dame Violet Dickson or Um Saud as she was fondly called. Dame Violet loved Kuwait so much that she gave her son a Kuwaiti name. When the renovation work was Þnished the Dicksons Þlled the house with a wonderful array of paintings, Persian carpets, antiques, and family memorabilia. The family had links with India and other parts of the Arab world and there were a number of unique items such as two swords given to Colonel Dickson by the Þrst king of Saudi Arabia, Abdul Aziz Ibn Saud. The Dickson house became Dame Violet s home for close to 60 years. During the Dickson s early years here, Kuwait suffered from political upheaval and desert raids from the Ikhwan who were in revolt against King Ibn Saud of Saudi Arabia. While Colonel Dickson was busy with the political negotiations at that time, Dame Violet set about her role as a 37

37 36 The Dickson House: Historical Symbol of Friendship

38 of both companies in the drawing room of the Dickson House, witnessed by Colonel Dickson. Sadly the table used for the signing was lost when the house was looted by Iraqi troops many years later. In her book entitled Dame Violet Dickson author Claudia Farkas Al Rashoud writes about the prophetic dreams the late Colonel Dickson had which lead to the discovery of Burgan Þeld. The internal courtyard of the house One particular event of the Dickson s time here was to have huge consequences for the future of Kuwait. One night, Colonel Dickson had a vivid dream which led to the Þrst discovery of oil in Kuwait. He dreamed about a large sidr tree in the desert. Greatly troubled by his vision, he visited an old Bedouin woman in the desert known for her abilities in deciphering dreams. She listened, and then told him to advise the Superintendent of Kuwait Oil Company to move The late Sheikh Abdullah Al Jaber Al Sabah with Dame Violet Dickson his team and camp from the current location, Bahrah, to Burgan. Once they had relocated, they were to search for the sidr tree, and then drill for oil close by. The drilling team did as they had been instructed, and shortly afterwards, found oil close to the lone sidr tree in that area. The Burgan Þeld was a major Þnd, and one of the largest in the region at that time. Despite the enormity of this event, however, it is more for their humanitarian actions and dedication to Kuwait that the Dickson are remembered. Ironically, oil wealth brought changes to Kuwait which the Dicksons found difþcult to wholeheartedly support. Colonel Dickson died in 1959 at the age of 78, and his widow chose to stay in Kuwait in their seafront home. Violet Dickson continued to live there until ill health forced her into hospital in She was evacuated to Britain from the KOC hospital at Ahmadi during the Iraqi invasion and died not long after. In 1998 the National Council for Culture, Arts and Letters (NCCAL) began the immense task of restoring the house which had been looted and abandoned during the invasion period, and not maintained for many years. NCCAL s goal was to return it to how it had been during the time of the Dicksons. A full structural survey revealed that much of the building was in an extremely delicate and dangerous state. With the support and interest of HH the Amir, the Dickson House once more stands proudly looking out to sea with its fresh white walls and distinctive blue railings. 39

39 The Dickson House overlooking the Arabian Gulf humanitarian. Numerous stories from Kuwait s Þrst generation praise her willingness to extend a helping hand in any form, through Þnancial aid or giving food or shelter to the needy. In his role as Political Agent Colonel Dickson was involved in the negotiations between the Amir at the time, Sheikh Ahmed Al Jaber Al Sabah and two rival oil companies seeking Kuwait s oil concession. The two companies joined together in 1934 to form Kuwait Oil Company and the resultant agreement was signed by Sheikh Ahmed and representatives 38

40 KPC s vision is to become a regional leader in HSE performance Submit your releases, news items, ideas for articles, attendances at conferences and symposiums, reports on visiting dignitaries and letters, to the Editor-in-Chief of KPC World P.O.Box: Safat Kuwait Tel.: (965) Fax: (965) Website: media@kpc.com.kw