Oil and gas production in Kuwait

Jodie Humphries

Crude oil and natural gas are the two main energy commodities traded heavily in the international commodity markets. Any country blessed with these natural resources can amass great wealth as the price of oil and gas. As such, Kuwait has announced it will raise its oil and gas production.

Kuwait is a small, oil-rich country nestling at the top of the Gulf, flanked by large or powerful neighbours - Saudi Arabia to the south, Iraq to the north and Iran to the east.

Its oil fields were first exploited in the 1930s, and since the development of the petroleum industry after World War II and independence in 1961, oil has dominated the economy, making up around 90 percent of export revenues.

Kuwait is the fourth-largest exporter of OPEC and boasts around 10 percent of the world's proven oil reserves.

The latest Kuwait Oil & Gas Report forecasts that the country will account for 2.68 percent of Middle East (ME) regional oil demand by 2014, while providing 10.65 percent of supply.

Raising oil and gas production

Kuwaiti Minister of Oil, Sheikh Ahmad Al-Abdullah Al-Sabah, said a fresh strategy has been set out to raise oil output to four million barrels per day by 2020, and gas output to one billion cubic feet per day by 2016.

According to the Kuwait News Agency (KUNA), the minister addressed the ninth Arab Energy Conference in Doha saying that Kuwait's oil and gas strategy provides for drawing and training national cadres to manage oil operations at home and abroad out of eagerness to develop the country's national elements and to involve them in national development and prosperity. He voiced Kuwait's keenness to adopt the call for joint Arab cooperation in diverse areas, including oil, and recalled how his country had come to a key agreement with Saudi Arabia and Libya in 1968 to establish the Organisation of Arab Petroleum Exporting Countries (OAPEC), based in Kuwait, as well as several other Arab economic and oil organisations.

Kuwait is eager to contribute to OAPEC-stemmed projects involving offshore oil transport, financing oil projects and building repairing ships, he said. The Kuwaiti minister pointed to Kuwait's support for Arab development efforts by its bankrolling of many energy and electricity-generating projects in various Arab countries. At an international level, Kuwait has adopted a balanced oil policy within OPEC based on cooperation with both member and non-OPEC member states as well as consumers for the common benefit of all parties, he said, adding that this policy is intended to ensure the stability of the global oil market and curb oil price fluctuations.

The Kuwait Oil Company

The Kuwait Oil Company is one of the largest oil companies in the world. Kuwait's economy is heavily dependent on this particular state-run organisation and it is the backbone of Kuwait's economy. The company is involved in many activities relating to oil and natural gas exploration.

In order to increase gas and oil production, Kuwait Oil Company is planning to inject between US$17.5 and US$24.5 billion into oil and gas facilities.

Chairman Sami Al-Rushaid said the money would go to the development of pipelines, well drilling, pumping stations and the acquisition of tug-boats. He also said the state oil giant would give the private sector more share in the energy industry as the sector's contributions to the national economy have increased in the past fiscal year, Arabian Business reported.

Previous reports stated that Kuwait plans to produce more than four billion cubic feet per day (CFD) of gas by 2030.

The four billion cfd target would include a huge rise in non associated gas output to 2.7 billion cfd, Mohammad Hussain, deputy managing director for planning and gas at KOC, said in a presentation to an industry event.

The non associated gas would come from the neutral zone the country shares with neighbour Saudi Arabia and from fields within Kuwait, he said to Arabian Business.

Kuwait is plugging the gap between supply and demand with imports of liquefied natural gas (LNG).

Tight supply has been exacerbated by OPEC member Kuwait's adherence to the producer group's oil output restrictions since late 2008. As most of Kuwait's gas is a by product of oil production, when it pumps less crude, it pumps less gas.

To counter this constraint, Kuwait is working on a scheme to increase output of non associated gas fields to one billion cfd by 2016.

In February, state run Kuwait Oil Company signed a five year service contract with Royal Dutch Shell to develop gas fields in the country's north sector.

The Gulf Arab state does not have enough natural gas to meet power demand and burns a large volume of oil products at power stations. Like its oil exporting neighbours, Kuwait has been slow to develop its gas reserves to meet domestic demand.

Gas production for Kuwait

Gas has become vital for Kuwait. Speaking in an interview with Marcopolis.net, where he was asked 'Are you going to play a major role in the future as a major exporter of gas or will you only cater to your domestic needs and power generation?' Kuwait Oil and Gas, Kuwait Oil Company (KOC), Chairman and Managing Director, Sami Al Rushaid said, "Realistically I think it will only cater to our domestic needs although we have been making discoveries and have undertaken a major aggressive exploration program to go after deep gas reserves. We are very optimistic we will be able to find additional reservoirs of gas, however. Although I don't think we will become major exporters, we are exporting LPG extracted from natural gas in small amounts and this will increase as we increase our production."

Asked about his worries for the future, Rushaid said, "The major challenge that we have is gas. We see the energy demand in Kuwait rapidly increasing and the gas has great value for the country. During peak demand time in the summer due to power consumption we are importing energy and this is a concern. Additionally, it is cleaner for the environment than the fuel we are burning and also, in the non associated gas production we are not limited by OPEC and we can produce what we want to produce. We can replace the oil that is burned and consumed by power plants to free it for export."

Kuwait is set to play a major part in the oil megaprojects obsession over the following years as it invests with the money earned from its oil revenues. As it ramps up its oil and gas production, you never know, more infrastructure plans could be on the cards from this oil rich country.

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