The country’s energy industry is standing up to the challenges posed by the low oil price, according to Jason Rosychuk & Damian Crosse.
Investment delays, political disputes and bureaucracy have held back Kuwait’s reputation as a place to do business in recent years. But with renewed emphasis from the state on developing its natural resources and $33.4bn of new projects, Kuwait remains resilient.
While some of the world’s most hydrocarbon-dependent countries need to sell oil at a certain price to balance their budgets, Kuwait has one of the lowest break-even levels, according to the International Monetary Fund. On top of this, a tight control on spending means Kuwait often runs a budget surplus.
The award of new upstream contracts has been relatively sluggish in Kuwait over the past few years, but new technology is breathing life into some of Kuwait’s more mature fields. After a period of slow development, Kuwait last year announced some of the largest oil and gas projects in the region. Despite the recent decline in oil prices, there’s a feeling regional governments will refrain from curbing output even at the $40 mark.
Kuwait Oil Company, a subsidiary of the country’s national oil company Kuwait Petroleum Corporation (KPC), recently invited five international oil companies to bid for a contract to develop the country’s Ratqa heavy oil field. This will involve constructing Kuwait’s biggest heavy oil reservoir which will produce 60,000 barrels a day by 2018/19. The new contract is part of a wider push to ramp up production in the country to four million barrels a day by 2020.
Another KPC subsidiary, Kuwait Foreign Petroleum Exploration Company, recently made a high profile $1.5bn investment in acquiring a 30% stake in Chevron’s Canadian Duvernay shale unit, a move seen as part of a wider drive by many Gulf states to acquire shale technology.
To help attract new investors and spur economic growth, last year Kuwait introduced a law on Public Private Partnerships (PPPs). Since Kuwait’s economy is still very much dependent on government spending, the successful launch of PPP projects is very important to developers, construction companies and suppliers, as well as the financial institutions that might fund them Despite its small geographic size, Kuwait is a giant in the oil and gas industry. Oil and gas currently accounts for about 60% of the country’s gross domestic product and about 95% of its export revenues. Proven crude oil reserves amount to 101.5mn barrels, with 2.9mn barrels of crude oil produced and 2.05mn barrels exported per day. Its marketed production of natural gas currently stands at 16.3bn cubic metres, while output of refined petroleum products stands at roughly 992,100 barrels per day.
There is a possibility of projects being reevaluated over time. But the state’s implementation of new laws, investment in advanced technology to enhance the recovery of natural resources and the billions of dollars’ worth of investment due to be awarded in projects over the coming year shows an oil and gas industry with strength and determination, when other oil rich nations might be looking a bit more conservative.
