The Kuwait Oil Co. (KOC) will carry out an exploration drilling programme in March 2017, the company’s chief executive officer Jamal Abdulaziz Jaafar has recently announced.
“We are going to start drilling next year,” Jaafar said. “We have finished the seismic and data interpretation [work]. We are currently identifying where we need to drill. We have six potential areas where we are going to start delineation in 2017.”
He did not identify the six areas intended for exploration.
KOC is in the process of tendering two contracts associated with the offshore exploration programme. One contract will cover logistics work and the other will focus on identifying where offshore rigs should be located, said Jaafar.
Kuwait had planned to explore its offshore acreage this year, but the drop in oil prices led KOC to delay the scheme slightly.
When the programme was discussed in 2014, before the delay, KOC figures told local media that the programme would assess Kuwait’s oil and gas reserves from the surface down to Paleozoic formations, from 300 to 7,300 metres in depth.
In 2014, KOC expected the exploration programme to cost $1-1.5bn. Rig costs have fallen since then because of reduced demand as a consequence of low global oil prices.
The costs of Kuwait’s offshore exploration programme are therefore likely to be lower than initially anticipated.
Kuwait’s plan to target its offshore oil and gas reserves demonstrates the country’s shift in focus to non-traditional sources of oil and gas. Most of Kuwait’s output is from the onshore Burgan field. It also extracts some reserves from the offshore Neutral Zone in partnership with Saudi Arabia, which retains a claim to the area.
Kuwait’s relative inexperience in developing offshore fields means it should draw on international expertise, said Hosnia Hashim, vice president of operations at Kuwait Foreign Petroleum Exploration Co. (KUFPEC).
Like KOC, KUFPEC is a subsidiary of Kuwait Petroleum Corp., but it focusses on international investments alongside IOCs.
Gas represents around 60% of KUFPEC’s portfolio, most of which is produced from offshore fields, said Hashim. “I think that it is key for Kuwait to learn from KUFPEC’s cost saving in offshore oil and gas [projects].”
KUFPEC has lowered the cost of developing offshore projects abroad through the use of new technology, which could be applied to offshore oil and gas development in Kuwait, she said.
Kuwait’s decision to focus on offshore exploration – which is likely to require significant investment – at a time of low oil and gas prices is unusual. But there are several reasons that developing the country’s offshore reserves makes sense.
Firstly, Kuwait’s demand for gas is rising. Kuwaiti authorities are becoming increasingly comfortable with importing gas as LNG. Even so, sourcing new domestic supplies of gas, particularly in non-associated fields, would benefit Kuwait.
Secondly, the push to develop Kuwait’s offshore acreage may also have been prompted by Iran’s increasingly assertive stance on the development of fields that lie on maritime borders with Gulf Cooperation Council states. Iran earmarked the Durra/Arash gas field, which lies on the border between Iran and Kuwait, for development in April last year. The move resulted in a diplomatic spat between the two countries.
Finally, Kuwait has chosen to largely maintain its pipeline of development projects, despite low oil prices. It is also carrying out onshore exploration work. It discovered a new oil and gas field at Al-Jathatheel in west Kuwait as a result of its onshore exploration programme last month.
