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Full speed ahead for Kuwait

Kuwait is on the road to boosting oil-production capacity to 4m b/d, but lifting fuel subsidies will be trickier

Kuwait will forge ahead in 2017 with plans to boost its crude-oil-production capacity to 4m barrels a day by the end of the decade, through partnerships with Shell and BP. Enhanced technical-service agreements with the two European oil majors will raise capacity from the present level of 2.8m b/d.

Shell will develop the Ratqa field, near the Iraqi border in northern Kuwait. A first phase of development has a target of producing 60,000 b/d of heavy crude oil. This will rise to 120,000 b/d by 2020 and possibly to 270,000 b/d at a later date. Shell separately is helping with water management at a number of fields.

BP is tasked with maintaining production of 1.7m b/d at the supergiant Burgan field. Burgan, which has been producing for six decades, with output peaking at 2.4m b/d, has the added responsibility of compensating for much of Kuwait's 250,000 b/d share of Neutral Zone production, which has been unavailable since May 2015 because of a dispute with Saudi Arabia. Kuwait enters 2017 with no indication that the spat is close to being resolved.

In the downstream, construction of the 0.615m-b/d oil refinery at al-Zour in the Neutral Zone will push ahead in 2017, with completion scheduled for late-2019. The refinery and associated petrochemicals complex will be run by a state firm created specially for the purpose - Kuwait Integrated Petrochemical Industries Company.

Also at al-Zour, preliminary work will begin in 2017 on a permanent 3bn-cubic-feet-a-day liquefied natural gas-import facility. It is expected to enter service in 2021. Until then, Kuwait will continue to import gas through a floating-LNG facility near Mina al-Ahmadi.

But while upstream and downstream projects may make progress in 2017, disputes between the National Assembly and the government over the latter's attempts to reduce fuel subsidies will continue to throw energy policy off course. The government raised prices on 1 September 2016, while the Assembly was in recess, only to have a court overturn its decision a month later. MPs later indicated their determination to block price rises, eventually precipitating the mid-October resignation of the cabinet and subsequent dissolution of parliament. That has opened the way for new elections, but not necessarily a resolution of the fuel-price controversy.

Kuwait differs from the other Gulf states in the inability of its oil ministers to hold onto their jobs. Anas al-Saleh has been acting minister since November 2015 - longer than many permanent appointees in the post. The energy sector will be hoping that 2017 does not end with the job still in the hands of a caretaker.

This article is part of Outlook 2017, our annual book looking at energy market trends for the year ahead. To purchase a copy, click here

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