Kuwait seeks to become key gas exporter

Farouk Al Zanki, Chairman and Managing Director of the state-owned Kuwait National Petroleum Company, said Kuwait will begin commercial production from the recently discovered gas before 2015. He said the bulk of the production would be used to meet domestic demand, but added he was optimistic more gas would be found and exported.

He also spoke about Kuwait’s plan to expand its oil production capacity to nearly four million barrels per day by 2020. “It is no secret that we have successfully discovered gas condensate and light oil fields in the recent past, mainly in northern Kuwait. We have plans to commission three engineering procurement fabrication projects for Jurassic extraction before 2015,” he told the Oxford Business Group.

“Jurassic gas production will be on par with associated gas by 2015… Most of this production is targeted for internal consumption and will provide energy for industrial plants and electricity. We hope to continue finding more free gas and gas condensate in the future. If we do, I would very much like to see Kuwait becoming a major player in gas exporting and liquefied natural gas manufacturing, transportation and marketing,” he said in statement sent to Emirates Business.

Zanki, also former chairman of the Kuwait Oil Company, did not say whether such projects would mean Kuwait will drop plans to import gas. In 2000 Kuwait signed an agreement with Qatar to import more than one billion cubic feet of natural gas per day through a pipeline that would have passed through Saudi territory. But the project was blocked because of Saudi Arabia’s objection due to its political rift with neighbouring Qatar.

The project envisaged the construction of a 600-km pipeline that was to run under the territorial waters of Saudi Arabia and neighbouring Bahrain. Its cost was estimated at around $3 billion (Dh11bn) in 2000 but is believed to be 30-40 per cent higher now because of soaring material and contracting costs. Riyadh’s opposition has prompted Kuwait to consider getting its gas supplies from Iran but no agreement has been signed between the two countries.

Gulf oil analysts believe Kuwait, in the absence of new major discoveries and supply agreements with Qatar, could buy gas from Iraq but doubted it will rely fully on that country given its ongoing conflict and political uncertainty, as well as its relatively high costs of gas production. Another option is to expand the Dolphin project, which involves transport of natural gas from Qatar to the UAE and Oman through an underwater pipeline that was commissioned in 2007. But they noted it carries security risks as the pipeline has to traverse the waters of either Saudi Arabia or Iran.

Kuwait has around 1.55 trillion cubic metres of natural gas, excluding the nearly 35 trillion cubic foot that were discovered in the northern Sabriya and Um Naqqa fields in 2006. Its gas output of around 9.7 billion cubic metres in 2006 was a fraction of the gas production of 65 billion cubic metres in Saudi Arabia, 46 billion in the UAE and 45 billion in Qatar. Gas consumption in Kuwait, a key Opec oil producer, is growing by at least five per cent a year and its total energy demand of 350,000bpd in 2007 made it the fourth in the Arab world in terms of per capita with consumption of 45.7bpd.

The rapid growth in its gas consumption is due to a surge in the industrial sector and a high population growth of nearly three per cent. Apart from industry, the state needs gas for household purposes and power generation. In 2006, Kuwaiti’s then Energy Minister Sheikh Ahmad Al Fahad Al Ahmad Al Sabah said the country could invest between $15bn and $20bn in the next five years to develop its gas sector and tap the latest discoveries. “But we believe we have more gas than has been estimated and all the signs indicate we will become one of the world’s main gas producers,” he said.

Zanki said Kuwait is also pushing ahead with ambitious plans to raise its crude output capacity to four million bpd in 2020, adding the surge in oil prices would offset a sharp increase in the costs of such projects.

“KOC is on a steady track to achieve its strategy of four million bpd production capacity by 2020. The demand for oil looks set to increase, as evidenced by the high oil prices. KOC will always be a reliable supplier.

“The key steps are straightforward: an increase in production capacity from the existing and to-be-explored resources; the modernisation and expansion of our surface facilities and infrastructure; and the enhancement of our export capabilities… I believe this fast-and-furious activity will continue for the foreseeable future and will be reflected in labour and material costs. We have factored this into our bottom line, so that potential effects on cash flow are mitigated.”

The number

1.55trn: Cubic metres of natural gas have been discovered in Kuwait. This excludes the 35 trillion cubic foot of gas that were discovered in the northern Sabriya and Um Nagga fields in 2006