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Kuwait still drilling

Kuwait is plugging away in its upstream and will seek more IOC help to do so

Kuwait is hoping to sign more Enhanced Technical Services Agreements (Etsas) with international oil companies later this year as part of efforts to raise production capacity to 4m barrels a day by 2020, Nizar al-Adsani, head of Kuwait Petroleum Corporation (KPC) told Petroleum Economist's GCC Strategy Forum in Kuwait in late January. This involves increasing current capacity by around 1m b/d.

Shell and BP were awarded Estas in 2016, the former to develop heavy oil reserves in the north of the country, the latter to help extend the life of the giant Burgan field, discovered in the 1930s.

Adsani said he expected oil market volatility to "prevail in the medium term and it's legitimate to ask whether KPC is ready for the future. We recognise that it's essential to make investments now to enable Kuwait to be in a better and more flexible position in the future."

He added that the state company had prepared "a strategic plan and clear road-map for the whole oil sector" up to 2030. During the initial five-year period, beginning 2017-18, KPC would invest KD35bn ($115bn), of which 59% was allocated for specific and identified projects. Of the total expenditure, 86% would be on exploration and production, and the rest on refining and petrochemicals.

The development of heavy oil, Adsani continued, "is an integral part of our vision and plans", with investment of $6bn in the first phase of development. The aim is to reach capacity of 60,000 b/d by 2018, rising eventually to 220,000 b/d.

The involvement of IOCs in Kuwait's upstream is a sensitive issue in the emirate, with parliament and the media over the years rigorously questioning the need for outside assistance. Plans to develop the heavy oilfields in northern Kuwait have been on the table for nearly two decades. Adsani said IOCs were needed because of their "skills, knowledge and experience"; they brought "advanced new technologies never used in Kuwait".

4m b/d Kuwait's 2020 output target

The extraction of heavy oil is expensive because it requires the use of advanced enhanced oil recovery (EOR) techniques. Natural gas or diesel is burned to create the steam needed to warm the oil and allow it to flow more easily. Kuwait is now looking at a scheme being developed in Oman where solar power is used to create the steam, requiring the burning of gas or oil only during the hours of darkness, thus significantly reducing costs.

The KPC chief executive said another of the company's focuses was the petrochemicals industry. A 0.615m-b/d integrated oil refinery/petrochemical project is being developed at al-Zour in the Neutral Zone, which will process the heavy oil reserves when production begins. Another focus is the development of Jurassic free gas reserves. About 80-90% of natural gas produced in Kuwait is associated. With domestic consumption continuing to rise, Kuwait, in line with other Gulf energy producers, is forced to import liquefied natural gas to meet demand.

"We spend all our time monetising oil," said MR Raghu, managing director of Marmore Mena Intelligence, "but not natural gas. The region has huge reserves, but we are importing gas."

Producers are on track

Oil-producing states are "passing through a critical phase" as they await the impact of the Opec and non-Opec agreements to cut production, Kuwait's oil minister Issam Al-Marzouq told Petroleum Economist's annual GCC Strategy Forum in Kuwait City. But Al-Marzouq, who chairs a five-nation committee to monitor the deal, is certain that the results will be positive from the perspective of producers.

"We are confident that rebalancing in the oil markets has already started," he told delegates. "We expect a positive impact on the market by the end of the first quarter of 2017." The source of his confidence? Opec and non-Opec producers "are complying with their commitment to cut", he said. He described the deal as "a collaborative effort among producers to follow a roadmap to guarantee balance in the markets". The Kuwaiti minister said he expected oil prices to be in the $55-60-a-barrel range throughout this year.

While Kuwait has cut its production in line with the agreement it is also looking to a time when it can achieve its target of raising capacity to 4m barrels a day. For this to happen it will need to start receiving again its 250,000-b/d share from the Neutral Zone. While there are indications that Kuwait and Saudi Arabia have agreed in principle for a restart, Al-Marzouq could not predict when it would happen, saying only that he expected "a positive development" in the coming weeks. Even when a return to the fields is agreed "it will take some time before we can bring back production".

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