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All change in Kuwait's energy sector

Kuwaiti energy officials are hoping that the recent wholesale shake-up of senior management will herald a calmer future

Simple statistics can sometimes tell a story better than words. Take the case of the number of oil ministers appointed in two neighbouring Middle Eastern states. Saudi Arabia has had only two since 1995: Ali Naimi and the current minister Khaled al-Faleh.

Kuwait is a very different proposition. When Khaled al-Fadhel took over at the oil ministry in late December he became the fourth person to hold the job in just two years. Since the beginning of this century, few Kuwaiti oil ministers have remained in the job for more than a year.

Against this chronically unsettled background it is little wonder that Kuwait's energy sector longs for a period of political stability. Few expect this to come soon. Successive ministers have had their plans challenged by members of Kuwait's boisterous National Assembly or have been called to account over the awarding of contracts and accusations of financial irregularities.

Fadhel's predecessor Bakheet al-Rashidi stepped down in December (exactly a year after being appointed) because he came under pressure from members of parliament who accused the ministry of overlooking costly inefficiency and delays at the 615,000-bl/d oil refinery under construction at al-Zour and at a refining project in Vietnam.

In contrast to the frequent arrival and departure of oil ministers, the experience of Kuwait's energy professionals has been relatively calmer. In particular, Nizar al-Adsani remained CEO of Kuwait Petroleum Corporation (KPC), the state company that oversees upstream, downstream, marketing and oil transport subsidiaries, for more than five years. In December, he was replaced by Hashem Sayed Hashem, who spent three years as CEO of Kuwait Oil Company (KOC), the country's main upstream firm, up to 2016. After that, KOC had two more bosses before the appointment in February of Emad Sultan.

With newcomers at the helm of the oil ministry, KPC and KOC, along with senior management changes at all eight state energy firms, the sector is in yet another period of upheaval, with officials waiting to hear what new strategies might be unveiled. There is speculation within the sector that mergers of some of the state businesses might be on the cards to streamline operations and cut costs.

Upstream challenges

KPC's Hashem kept his cards close to his chest when he addressed Petroleum Economist's 5th Annual GCC Energy Strategy Forum in Kuwait City on 5 February. With most of his speech focussing on the global oil market, he spoke only in passing of the country's upstream, saying Kuwait would continue seeking "to expand oil production capacity". The KPC boss gave no figures.

However, with Kuwait's 250,000-bl/d half-share of production from the Neutral Zone shut in since mid-2015 (see In Depth, p12), the country has had to abandon its long-held goal of raising capacity to 4mn bl/d by 2020. At present it averages around 2.7m bl/d. Production from heavy-oil fields in the north of the country is scheduled to begin later this year, rising to around 85,000 bl/d by 2021.

Compounding the effect of the missing Neutral Zone barrels has been a decline in production in some fields in Kuwait itself, notably Burgan. The capacity of this super-giant field, discovered in 1938, has slipped below 1.7mn bl/d because of delays in the installation of new equipment. In 2017, BP signed an enhanced technical service agreement with KPC to help extend the life of Burgan, and UK-listed oil services firm Petrofac was awarded a contract to install a new 120,000bl/d capacity gathering centre-GC32-which is scheduled for mid-2020 start up.

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