KUWAIT - Part 1 - Overview, The Geology & Exploration.

With the help of international oil companies (IOCs), Kuwait is to raise its sustainable crude oil production capacity to 4m b/d by 2020. Production of natural gas will rise to more than 2,000 MCF/d by 2020. Kuwait Oil Co. (KOC), the local upstream arm of state-owned Kuwait Petroleum Corp. (KPC), is concentrating on development of oilfields rich in natural gas as well as non-associated gas fields found recently.

Kuwait's energy consumption has more than trippled in two decades, expected to reach about 36.5m tons/year of oil equivalent in 2007, from 9.9m t/yoe in 1993 (see Downstream Trends). Kuwait wants to accelerate its shift from oil to natural gas, now that it has found large reserves of non-associated gas in the north. Kuwait is also to import natural gas by pipeline or in LNG form from neighbouring countries (see oil exports and gas trade in Part 3).

Kuwait's crude oil production capacity has reached 2.7m b/d. With world demand for oil being strong, Kuwait's actual output now is close to this capacity. New capacity was made ready after the reopening of gas-boosting station in the northern Rawdhatain oilfield near the border with Iraq, which was destroyed by an explosion and fire in January 2002 (see Part 2).

The government has conceded a key parliamentary demand over Project Kuwait, the state's landmark but much-delayed upstream initiative. In early May it said it will allow the National Assembly (parliament) to approve each individual contract. However, a number of problems could delay the project even further. Energy Minister Shaikh Ali al-Jarrah al-Sabah was on May 4 quoted as saying: "If parliament wants to approve each contract of the northern oilfields [capacity expansion] projects individually and issue them like a law, it is fine with me. If this is the only way I can defend the rights of the country, I have no problem accepting this demand" (see Part 2).

Sa'd al-Shuwaib has been appointed acting CEO and vice-chairman of KPC, with effect from May 1. He will remain in the position until a replacement is found for former boss Hani Hussein, who resigned in late April. Shuwaib will continue as CEO and chairman of KPC's unit Petrochemical Industries Co. (PIC). His priorities include privatisation of non-core oil and gas operations and promoting Project Kuwait, a $9,500m initiative to open up expansion of the northern oilfields to IOCs. A widescale reshuffling of the top jobs in the petroleum sector is expected in August (see who's who in Part 5).

Project costs for the upstream, midstream and downstream branches of the petroleum and petrochemicals industries have risen sharply since 2002, affecting Kuwait and the other parts of the world. In 2002, the cost of Project Kuwait was estimated at $7,000m. Downstream project costs have risen more sharply. For example, Kuwait's 615,000 b/d refinery project to be built at al-Zour was in 2002 estimated to cost about $2,000-2,500m. Now bidders talk of $17,200m (see DT No. 23).

Kuwait is increasing its investment in overseas E&P ventures, with KPC having become a trans-national player (see Part 4 in OMT No. 25). KPC has teamed up with Shell and BP in seeking overseas investment opportunities and has been looking for a stake in a Japanese oil refining operation (see DT No. 25).

KOC has made interesting gas discoveries at the northern oilfields. Since 2000, it has found major reserves of high quality oil rich in gas. Having "strategic alliances" with big IOCs since 1992 to provide it with technology, KOC has service contracts with BP, Chevron, ExxonMobil, Shell and Total. An improved service arrangement for 20-25 years, including incentives to cut costs, is being offered to the IOCs (see Gas Market Trends of this week).

Kuwait has a booming petrochemical sector. An olefin venture is making good profit, and this is being expanded. It is having an aromatics complex (see DT 24).