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State-owned Kuwait Petroleum Corporation (KPC) will struggle to deliver single handedly the key projects in northern Kuwait that are earmarked to provide the bulk of the planned production capacity drive to its 4mn b/d target, a senior Kuwaiti oil industry figure warns.
Much of Kuwait’s future incremental production is made up of challenging heavy oil deposits or production related to non-associated gas projects, both areas in which KPC has little experience. Expansion in the north was to be anchored by its Project Kuwait initiative, bringing in a number of foreign oil consortia. When political opposition sabotaged this, KPC launched negotiations with ExxonMobil aimed at a 700,000 b/d heavy oil project at the Lower Fars reservoir of the northern Ratga field and an Enhanced Technical Service Agreement with Shell for emirate-wide gas development. Again, parliamentary opposition has so far squashed even these fall-back measures and continues to frustrate Kuwaiti oil development (MEES, 12 October).
Project Kuwait, while “politically dead,” admits the official, is both “technically very much alive and in our plans.” It, or a very similar initiative, is viewed as vital. “As long as Kuwait says it wants to reach 4mn b/d, it doesn’t have a choice,” says the official. “Primarily it is because they simply don’t have the expertise in-house. The gap between current capacity and 4mn b/d is all difficult stuff,” he adds. The 700,000 b/d heavy oil target has been reduced to 450,000 b/d, MEES understands. KPC has launched an international recruitment drive, but there has been a lack of focus on hiring experienced personnel, with qualifications that match northern projects requirements, the official says. “And you can’t just hire an individual who worked at ExxonMobil and think you have hired ExxonMobil,” he notes.
Gas development – Kuwait claims its northern Sabriya and Umm Niga fields hold 35 tcf of gas in place – is likely to present at least as many problems as heavy oil. “This will change the way we work. You can’t just develop gas or NGLs as an isolated project. It has to be linked to the downstream, to marketing, to shipping and so on. It is a real organizational challenge,” says the official. Phase 1 full capacity of 175mn cfd for Sabriya and Umm Niga, originally scheduled to be on stream by end-2007, has still not been reached. And there are strong doubts that KPC can project manage Phase 2, which aims to boost output to 600mn cfd, to schedule. Light crude, rather than condensate as earlier claimed by Kuwaiti oil executives, is being produced in association with the northern gas field development and a 120,000 b/d early production facility (EPF) is being built to handle future liquids production at Sabriya and Umm Niga. “It is not condensate. It is light, around 52° API, but it is still technically crude,” says the official. Kuwait’s planned 805mn cfd fourth gas train, which was to handle northern gas output, has also been delayed.
Kuwaiti downstream investment arm KPI is forging ahead with projects both in Vietnam and China, but domestic expansion has hit yet another obstacle. Kuwait is planning to relaunch its troubled fourth refinery project. But, MEES learns, officials currently under investigation in Kuwait’s diesel smuggling operation include senior executives responsible for the proposed 615,000 b/d refinery project. A proposal to give parliament a veto over projects before they are put to the Supreme Petroleum Council for approval will probably come to nothing, says the official: “It is not going to happen. That would lead to complete paralysis.”
Border Issues
Kuwait has also found resolving the issue of border fields with its neighbors hard going. Those with Iraq are the most pressing. Alleged Kuwaiti siphoning off of crude from Iraq’s Rumaila field was one catalyst for the 1990 Iraqi invasion, and earlier this year Iraq started drilling in the Safwan border field (MEES, 27 April). The two sides have held meetings – agreeing on a shortlist of consultants and a methodology for reservoir delineation – but progress has been slow. Politics aside, a failure to agree could be expensive. “Those who suck fastest will get the most oil,” argues the official. Without an agreement, both sides will be incentivized to maximize production, with potential damage to key reservoirs on both sides of the border, he adds. As regards the offshore Durra gas field, Kuwait is proposing joint exploration with both Iran, which claims the field lies in its territorial waters, and Saudi Arabia. © Copyright MEES 2009.
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