Fluor was chosen by Kuwait's National Petroleum Company to manage the project, which was slated to earn the American company more than $2 billion.
Fluor was not completely surprised by the cancellation, as several days ago Kuwait's Prime Minister Nasir al-Sabah was quoted by the local al-Watan newspaper as saying that the project would be halted due to economic inadvisability.
The prime minister noted that the sharp drop in oil prices was what had prompted the government to cancel the project and save the money required for its completion.
Simultaneously, four construction companies from South Korea, who were slated to take part in the refinery's construction, received an announcement cancelling the letter of intent they had signed in May of 2008. The Korean companies' share in the project totaled more than $6 billion.
According to the original plan, Kuwait was meant to expend some $14 billion on the new refinery in the region. It was scheduled to be ready in 2012 and serve as the country's fourth refinery, with a manufacturing ability of 615,000 oil barrels a day.
Sources in Kuwait estimated that the project was not cancelled for financial reasons only. The Kuwaiti parliament recently discussed the deal, and several parliament members raised questions over the way Fluor won the project without a tender.
Late last year, Kuwait terminated a multibillion-dollar joint initiative with Dow Chemical. Country officials estimated that the cancellation of the project had saved the public some $6.5 billion.
Doron Peskin is head of research at Info-Prod Research (Middle East) Ltd