"We will be shortly retendering the project after the bids we received were found to be very high," Sami al-Rasheed, chairman of Kuwait National Petroleum Company (KNPC), told AFP.

"The new tender will be based on a cost plus profit margin," which means paying the cost to the foreign companies plus an agreed profit, Rasheed said.

KNPC, the downstream arm of state-owned Kuwait Petroleum Corp, has projected the cost of the 615,000 barrels per day (bpd) refinery at around 6.3 billion dollars.

But the refinery project director Ahmad al-Jeemaz complained last week that some companies bidding for the project had inflated their estimates to as high as 15 billion dollars.

KNPC has received nine bids from seven of the 11 international companies selected to submit offers to build the refinery, which is due to come on stream in early 2010.

KNPC, which owns all refineries in the emirate, has divided the project into four major contracts.

Kuwait currently has three refineries at Al-Ahmadi, Mina Abdullah and Shuaiba, all in the Emirate"s oil-rich southern region, with a combined refining capacity of about 915,000 bpd.

State-owned KNPC also plans to modernize the first two at an estimated cost of three billion dollars, a project planned for completion in early 2011.

Once the new refinery and the upgrades are completed, KNPC plans to shut down Shuaiba. This will leave three refineries with a production capacity of around 1.4 million bpd.

The OPEC member sits on 10 percent of the world"s oil reserves and currently produces around 2.4 million bpd of crude.

PIN/AFP