Kuwait's Focus On Expansion & Transformation in the Oil Sector
The Greater Burgan Oil Fields in Kuwait is widely considered as the world’s second largest oil field, surpassed only by Saudi Arabia’s Ghawar field. Burgan has been producing oil since 1938. The Rawdhatain, Sabriyah and Minagish fields have large proven serves as well, with 6 billion, 3.8 billion and 2 billion barrels of oil,respectively. All of these fields have been producing oil since the 1950s. They generally contain medium to light crude oil with gravities in the 30° - 36° API range The South Magwa field, discovered in 1984, is estimated to hold at least 25 billion barrels of light crude oil with a 35° - 40° API gravity. In November 2000, Kuwait announced the discovery of significant amounts of light crude oil at Sabriyah.
Another Kuwaiti field – Ratqa – has been the subject of controversy. Once thought to be an independent reservoir, Ratqa is actually a southern extension of Iraq’s super-giant Rumaila field. After the Gulf War of 1991, a United Nation’s survey team made a demarcation of the border between Iraq and Kuwait, and this demarcation put all the 11 of the existing wells at Ratqa within Kuwaiti territory. Kuwait produces around 40,000 bbl/d from Ratqa.
Current Oil Production
The bulk of Kuwait’s oil production capacity is located at the southern onshore Greater Burgan field, whose Burgan, Magwa and Ahmadi structures normally produce around 1.35 million bbl/d. Kuwait’s other main producing fields include the northern fields of Rawdhatain and Sabriyah (600,000 bbl/d of production capacity); the southern fields of Minagish and Umm Quadayr (150,000 bbl/d), and Kuwait’s share of Saudi-Kuwaiti Neutral Zone (150,000 bbl/d).
Construction of new gathering centers is a major focus of Kuwait’s upstream capacity expansion program. Prior to the Iraqi invasion in 1990, Kuwait had 26 gathering centers (GCs), with a total capacity of 4 million bbl/d. All 26 GCS were either damaged or destroyed during the war. By 1993 operations at 18 GCs had been restored.
In January 1996, Kuwait Petroleum Corporation (KPC) awarded China Petroleum Engineering and Construction Corporation (CPECC), a $ 390 million contract to build two new GCs, a significant step in Kuwait’s efforts to increase its oil production. CPC and Kuwait Oil Company (KOC) constructed the GCs, designated as GC-27 and GC-28, at the Umm Gudair and Minagish fields, respectively.
Work was completed in early 2001, three years behind the original schedule, mainly due to the construction delays. The Umm Gudair GC has a capacity of 190,000 bbl/d and Minagish has a design capacity of 210,000 bbl/d. The two facilities are part of Kuwait’s plan to raise the oil output from West Kuwait to more than 500,000 bbl/d (from 120,000 bbl/d) and overall production capacity of more than 3 million bbl/d (from around 2.4 million bbl/d currently).
Plans to expand oil production
Kuwait continues to plan for significant expansion it its production capacity. Kuwait hopes to reach a capacity of 3.5 million bbl/d by 2005/2006 (and 4 million bbl/d by 2020), up from around 2.1 – 2.2 million bbl/d at present. As part of this plan, known as "Project Kuwait", Kuwait is considering permitting foreign oil companies to invest in upstream production, which would reverse more than two decades of Kuwaiti policy.
"Project Kuwait" is a $ 7 billion, 25-year plan, first formulated in 1997 by SPC, to increase the country’s oil production (and to help compensate for declines at the mature Burgan field), with the help of international oil companies (IOCs ).
In particular Kuwait aims to increase output at five northern oil fields – Abdali, Bahra, Ratqa, Rawdhatain and Sabriyah – from their current 450,000 bbl/d to around 900,000 bbl/d by 2005.
Foreign Upstream Operations
Even though Kuwait’s overall overseas investments are considerably smaller than before the 1990 invasion by Iraq, Kuwait holds equity interests in oil production in several countries through the Kuwait Foreign Petroleum Exploration Company (KUFPEC). KUFPEC is active in Australia, Indonesia and Tunisia, among others. Most of the interests are either small fields or minority stakes though, and KUFPEC’s revenues have been under $ 200 million in recent years, making it a relatively minor part of Kuwait’s state oil establishment. According to KUFPEC’s 2000 annual report, the company is aiming to increase its production capacity to 100,000 bbl/d oil equivalent by 2010 up from around 35,000 bbl/d oil equivalent currently.
Natural Gas
Kuwait produces a relatively modest volume of natural gas (around 335 billion cubic feet – Bcf – om 2001), the vast majority of which is "associated gas" (i.e. found and produced in conjunction with oil). Kuwait hopes to increase its use of natural gas (both domestic and imported) significantly, especially in electricity generation, water desalination, and petrochemicals. A switch to natural gas (from diesel oil) would free up a substantial amount of oil for export, possibly 100,000 bbl/d by 2006. Kuwait also hopes to reduce flaring of associated gas by tying together the gathering centers. Finally, Kuwait continues to seek both associated and non-associated gas supplies.
As a beginning, in July 2000, Kuwait and Qatar have signed a Memorandum of Understanding (MOU) for possible export of Qatari gas from its offshore North Field – the largest non-associated natural gas field in the world – to Kuwait.
Besides Qatar, Kuwait also signed an MOU with Iran for import of natural gas via pipeline, most likely from its huge South Pars gas field. As of February 2003, it appeared that the two countries were in the final stages of negotiations on a 25-year gas supply deal. Approximately 300 million cubic feet per day (cf/d) of natural gas is to be delivered, beginning in 2005. The gas will be used for power generation at two new power plants.
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