Kuwait signs deal with Shell

State run Kuwait Oil Company has signed a five year service contract with Royal Dutch Shell to develop pure gas fields in the country's north, a Kuwait official and Shell said.

Gas demand in the Gulf Arab state has outstripped supply, forcing the world's fourth largest oil exporter to import 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.

Much of Kuwait's gas is a by product of oil production, so when it pumps less crude it pumps less gas.

The deal with Shell is to boost output from gas fields not associated with oil output, Kuwait oil sector spokesman Sheikh Talal al Khaled al Sabah told Reuters.

The deal will help decrease the exposure of domestic gas supply to OPEC output agreements on oil.

Gas fields

Kuwait plans to increase output from the gas fields to one billion cubic feet per day (cfd) from around 140 million cfd, state news agency KUNA reported.

Shell would provide the expertise and technology needed to produce from the difficult fields, Sheikh Talal told KUNA.

Kuwait had hoped to bring production up to 175 million cfd by now, but has had problems with its plans to increase output from the fields alone.

In a statement, Shell said: "This project is both complicated and challenging, due to unconventional geological formations, difficult reservoir conditions and complex gas compositions."

Both Talal and a Shell spokeswoman declined to give details on the value of the deal. The two have been negotiating a gas service deal for years.

Kuwait has struggled with plans to boost capacity in its energy sector, as politics have caused delays or cancellation to contracts.

 

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