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UPDATE 2-Kuwait keeps 2020 oil capacity aim despite problems
February 4, 2008 / 11:48 AM / in 10 years

UPDATE 2-Kuwait keeps 2020 oil capacity aim despite problems

(Updates throughout)

By Simon Webb

KUWAIT, Feb 4 (Reuters) - OPEC-member Kuwait is sticking to its 2020 oil output capacity target of 4 million barrels per day but faces challenges in finding contractors, technology and skilled labour, a state oil official said on Monday.

“We are very determined to (meet the target) and are working aggressively,” said Saad al-Shuwaib, chief executive of state-owned Kuwait Petroleum Corporation (KPC).

The country is spending $51 billion on its oil and gas sector from 2008-2012 to overhaul existing infrastructure and build new capacity. The world’s seventh-largest oil exporter’s output capacity stands at around 2.8 million bpd.

Kuwait, like other oil producers worldwide racing to bring new projects online, was facing challenges in finding contractors, skilled labour, buying technology and meeting environmental standards, Shuwaib said at a conference.

Analysts say political divisions will make it hard for Kuwait to meet the target, as expansion plans include the long-delayed Project Kuwait to boost output in the country’s northern fields.

Kuwait has for years been looking into allowing foreign firms to enter its hydrocarbons sector to carry out large exploration projects, mainly in the north of the country, which sits on around a tenth of the world’s proven oil reserves.

But the government has made little progress gaining approval from lawmakers who oppose the multi-billion dollar Project Kuwait. Shuweib said he was confident the plan would eventually go ahead.

“CONTRACTS ON STEROIDS”

Shuweib also said KPC hopes to sign enhanced technical service contracts with international oil companies this year.

Kuwait signed a preliminary deal with Exxon Mobil Corp (XOM.N) in October to produce heavy oil in the north of the Gulf Arab state. It is discussing similar contracts with BP (BP.L) and Chevron Corp (CVX.N), Shuwaib said.

These contracts are not a replacement for Project Kuwait but designed to run in tandem with it, another KPC Official said.

The new service contracts allow the firms a bigger role in the operations than old contracts with the same firms, the KPC official said.

“These are like the old contracts on steroids,” he said. “They encompass more activities but don’t come close to the constitutional prohibition (on the role of foreign oil companies in Kuwait’s upstream sector).”

The Gulf Arab country was set to begin importing liquefied natural gas (LNG) in the summer of 2009 and was currently working on facilities that would allow the import of 500 million to 750 million cubic feet of gas per day (cfd), Shuwaib said. Those facilities should be completed by the end of the year, he added.

Kuwait is short of gas for power generation during the peak period of electricity demand in the summer, when the country often suffers from blackouts. It also needs the fuel as a feedstock for its growing petrochemicals industry.

Shuwaib declined to say where Kuwait would buy its gas. The second KPC official said that Qatar was among several countries it was talking to, but it had yet to strike any deals.

“We are still pursuing very aggressively short-term LNG import options,” the official said. “We need the gas to tide us over.”

To boost its gas output, Kuwait will spend $8 billion to $9 billion over the next seven years, said Mohammed Ahmad Husain, an executive at state-owned upstream unit Kuwait Oil Company, speaking at the same conference.

Fields of pure gas, not associated with oil output, should begin producing for the first time in March, Husain said, three months later than planned.

Output will start at around 175 million cfd in March and should rise to around 600 million cubic feet by 2010-2011, Husain said.

The country hopes to reach total output of 1 billion cubic feet per day by 2015-2016. The first gas will come from the Umm Niqa field where Kuwait says it had found an estimated 35 trillion cubic feet of non-associated gas along with large amounts of condensates in the north in March 2006. (Writing by Lin Noueihed, editing by James Jukwey)

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