Interview: Sami Al-Rushaid, former MD of KOC

The shakeup is seen as a response to the damages payment to Dow Chemical after Petroleum Industries Co., a subsidiary of KPC, pulled out of a joint venture with the American petrochemicals company.

But KUNA, Kuwait’s national news agency, reports that the decision was not related to the annulled deal, but a decision to “infuse new blood into the oil sector and to give the opportunity for a second generation to carry full responsibilities amid requirements in the coming stage.”

A spokesman for Kuwait’s oil sector has said that according to the new commercial businesses law, released at the end of March, the role of chairman of the board of directors has been separated from the role of managing director with the appointment of a non-executive in the company to head its directors.

Oil & Gas Middle East had an opportunity to meet with the country’s longest serving oil executive, Sami Al-Rushaid, chairman and managing director of Kuwait Oil Company, shortly before the news that the reshuffling would take place to get his thoughts on the developments within the country.

Spending $14 billion on exploration and production projects is no small decision. With the many developments taking place throughout the energy industry such as the shale boom, the growth of renewable energy and the developments in Iraq, countries such as Kuwait are also stepping up their game.

Maintaining a top rank amongst the oil and gas producing giants of the world requires setting big goals for the future. At Kuwait Oil Company (KOC), the exploration and production subsidiary of government-owned Kuwait Petroleum Company; this ambition is best represented by the target production capacity of 4 million barrels per day (bpd) by 2020.

The country’s current capacity is approximately three million bpd with an additional 200,000 bpd produced from the divided zone with Saudi Arabia currently.

The target is expected to be reached mostly by development plans in North Kuwait with some developments in the divided zone as well.

“To achieve the 4 million bpd target, we aim to produce 3.65 million bpd from Kuwait and 350,000 bpd from the divided zone,” said Sami Al-Rushaid, chairman and managing director of KOC.

North Kuwait currently contributes to about 24% of KOC’s production. However, the assets are undergoing a massive upgrade which will see them increase production by over 40%. The goal is to increase their production levels from 700,000 bpd to 1 million by 2017.

This will be achieved by a series of activities that include a drilling campaign of horizontal wells for conventional resources, and vertical wells which will tap into Kuwait’s massive heavy oil resources.

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The expansion of surface facilities will include three gathering centres and associated headers, transit lines and power projects, all to be completed to assist in handling and processing the produced fluids including the associated water and gas.

“Some of the increase will come from the development of heavy oil. We are planning to produce 60,000 bpd of heavy oil by 2017 and 2018, but some will also come from the Jurassic light oil which is coming out with gas, we expect to produce around 400,000 bpd of light oil from the Jurassic by 2020,” he added. With less than a decade to go before these targets are hit, Al-Rushaid is not shy to point out that the strategy to achieve 4 million bpd by 2020 is challenging.

The company has also launched an action plan to drill 66 horizontal wells for its medium and light oil fields, as well as an additional 160 wells for its heavy oil fields.

But developing the new fields in North Kuwait is no easy task. “It is a very complex reservoir, it is deep, has high pressure, high temperature and has H2S, it has everything and dealing with that is one of the main challenges. However we are making very good progress on this so far,” he said.

Going beyond its 2020 deadline, Al-Rushaid stated that the company plans to have production capacity plateau at 4 million bpd from 2020 to 2030. “Generally speaking, what we will be seeing from 2020 to 2030 will be more of what we call the unconventional, heavy oil and Jurassic light oil.”

Sami Al-Rushaid also revealed the company’s plans to begin exploration and production offshore.

“So far, we don’t have any operations offshore, but they are definitely part of our expansion programme. We will be doing seismic surveys, we are possibly looking to potential partners, but first we have to see the potential,” he explained. “We know that under the Kuwait Bay there are reserves, but we will be going outside the Bay.”

The country may still be some years away from feeling the effects of reserve decline, but it has already embarked on a plan to implement enhanced oil recovery techniques.

“We do expect to implement EOR applications for some of the fields in Kuwait, we are looking at chemicals and are currently piloting this,” revealed Al-Rushaid. “We are also looking at international companies to bring in new technologies, but at the moment we are at the pilot stage.”

In addition to adopting tertiary production techniques, KOC is looking to continue increasing the size of its proven resources. The company has strategic objectives for 2030, to discover new oil equivalent that will enable it to produce 750,000 bpd of oil.

“These will be blocks within Kuwait and mostly deep drilling. We are doing a massive exploration programme, essentially going deep and using the latest technology in 3D seismic,” he revealed. The company has also set another target to discover free gas that will enable it to produce 1.5 billion standard cubic feet, also by 2030.

Kuwait is no stranger to the growing importance of natural gas in the world’s energy mix. The company recently reduced its production flaring to 1.44% throughout its operation sites. It is worth remembering that only six or seven years ago, the company had a very high percentage of gas flaring which represented around 17% of gas produced.

“We have really focused in this area recently, to reduce gas flaring, we have progressed extremely well, in implementing new projects and also with implementing strict procedures,” he muses. But the buck doesn’t stop there for KOC. The company intends to continue reducing its gas flaring practices to reach only 1% of gas produced, and Al-Rushaid believes that the company is not far from achieving that goal.

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“While it may be operationally very difficult, we are aiming to be close to zero flaring,” he adds. “Sometimes when going for zero you spend so much but get very little, that’s why we are looking at what we are calling the technical and economic limit.”

There is always room for improvement throughout Middle East’s energy industry, and this is a fact that Al-Rushaid does not hesitate to accept. In order for Kuwait to achieve its targeted production potential and to maintain its position as a regional leader of oil production, the company will need to develop local talent.

Kuwait Oil Company certainly manages to maintain a very high level of national content. “We have more than 80% nationals within Kuwait Oil Company, and this is probably the percentage for the entire oil sector in Kuwait,” says Al-Rushaid.

“Yes, nationalization and training is very important, we look at manpower as our main resource. So we pay close attention to national development,” he says.

“Development and training, especially in the core business is absolutely critical and important. We have training implementation units, TIU’s, within the company and these are divided by disciplines. But the importance of these TIU’s is that they are very structured and have curriculum that are targeted for university graduates and diploma graduates.”

In addition to developing a well trained workforce, KOC also plans to improve its research and development capabilities. “We are starting a programme which we expect will have a new R&D centre for the oil and gas sector,” he revealed. “There is already the Kuwait Institute for Scientific Research but we are going to create our own centre as well.”

But for Sami Al-Rushaid, there has always been more room to improve Kuwait’s economic capacity.

“Of course, our responsibility goes beyond oil and gas really, for example we are responsible for Al-Ahmadi City, so we sort of maintain the city by itself,” he explains.

“We also have a hospital for the oil sector, that we manage and we have exclusive rights of all land in Kuwait, other than the divided zone. So our responsibilities cover the entire Kuwait, the Al-Ahmadi township, the hospital, and additional responsibilities.”

Sami Al-Rushaid will be replaced by Hashim Hashim as managing director of Kuwait Oil Company.

In numbers:
– 24 percent North Kuwait contributes almost a quarter of KOC’s total production
– $14 billion Kuwait will spend this much on exploration and production projects.