In a presentation to the Kuwait Oil & Gas Exhibition and Conference yesterday, Sara Akbar, CEO of Kuwait Energy, delivered a frank reality check on the challenges facing private sector oil and gas Kuwaiti companies like hers operating in the oil and gas sector.
Akbar revealed her frustration at recent pay rises at Kuwaiti national oil companies, which have made it difficult for Kuwait Energy to retain local staff.
Kuwait Energy currently has around 80 staff in Kuwait, which Akbar says the company is growing to 120, with three managers currently being sponsored on MBAs. “Per capita we spend maybe even more than KPC,” said Akbar, as part of a talk on promoting excellence in Kuwait’s oil industry. Her concern is that private companies train local professionals, who then leave for public sector jobs on better terms.
According to a Kuwait Energy representative, as an ex-Kuwait Oil Company employee, Akbar had struck an amicable deal with Kuwait Petroleum Company (KPC) that they would not try to poach each others’ Kuwaiti staff. This arrangement came under pressure in 2011 as Kuwaiti staff at KPC went on strike to demand raises, which KPC awarded.
Akbar joked that Kuwait Energy’s Kuwaiti staff salaries were leaked to Kuwait Oil Company (KOC), which responded by hiking salaries, rendering Kuwait Energy’s offering to staff “uncompetitive.”
Akbar said Kuwait Energy has responded to the generous salary environment in Kuwait over the years but that this had recently led to higher operating costs, which was reflected in recent results.
The firm’s operating costs and expenses for the fourth quarter of 2011 totalled $23.1 million, $8.6 million higher than the previous quarter – which also saw costs from the firm’s exit from block JAA429 in Ukraine – and $8.9 million higher than the same quarter in 2010.
“It is very difficult to match KOC,” said Akbar. “The private sector is really struggling in Kuwait.”
Akbar’s remarks reflect a wider issue of employing GCC nationals in the private oil and gas sector. Companies from Shell to explorers and independents make efforts to integrate and train nationals, sometimes under political and commercial pressure, but are frequently undermined by large public sector pay rises. This trend became more pronounced in 2011 after civil unrest in the Middle East.
Akbar also said that restricts from the Ministry of Labour make it difficult for private sector upstream companies like Kuwait Energy hire expatriate talent.
“In truth, the environment for business in Kuwait is not the healthiest,” said Akbar.
Akbar made her remarks as part of a summary of Kuwait Energy’s business plan, where she said the company looked for opportunities where the interests of government and its people were aligned and Kuwait Energy can improve development by drawing on oil and gas.
The company has enjoyed a meteoric rise since its foundation in 2005, led by a string of oil and gas discoveries in Egypts Western Desert.
Kuwait Energy has projects in Egypt, Pakistan, Latvia, Yemen, Oman, Iraq and Russia. The company recently completed a restructuring to a Jersey holding company, and is preparing for a future listing subject to market conditions.
This article was amended on 20/02/2012.
