State-owned Kuwait Oil Company (KOC) has launched several new projects as it seeks to scale up its oil production capacity to 4 million barrels per day by 2040, up from 2.43 million bpd today.
However, analysts have warned that the expansion plans are “uncertain” in light of the nation’s dependence on fluctuating oil revenues and Opec’s production curtailment targets.
Kuwait's ambitions are prone to downside risks tied to volatile oil prices as well as certain technical challenges, observers say.
“Given Kuwait’s dependence on oil revenue, a lower oil price environment threatens the health of the country’s oil companies, reducing the ability to invest and commit to large-scale projects over the near term,” Fitch Solutions said in a report this year.
On a long-term basis, Fitch said that technical challenges associated with “extracting heavy crude from its northern fields remains a downside risk” to the company’s oil production forecast.
“Kuwait’s northern fields produce approximately 30% of the country’s oil, however, much of the crude in these reservoirs is heavy which makes extraction difficult,” the report noted.
A majority of Kuwait’s oil production comes from the Greater Burgan field in the country's south-east, which has a production capacity of about 1.6 million bpd and has been producing for more than 70 years.
The field requires billions of dollars in investments for costly enhanced oil recovery projects that could help maintain its production profile.
Fitch noted that “substantial upstream investment will be needed to achieve the robust crude oil and gas production levels desired by 2040,” which it believes to be ambitious due to Kuwait’s history of having missed previous state-set output targets.
However, KOC continues to press ahead with key expansion plans, along with an exploration drive.
Hashem al-Hashem, chief executive of parent company Kuwait Petroleum Corporation (KPC), recently said that KOC is implementing a number of strategic projects aimed at increasing the production capacity, gradually reaching a sustainable crude production capacity of 3.2 million bpd by 2025, local media reports said.
The Kuwaiti player reportedly aims to invest more than $6.1 billion on exploration over the next five years and increase its production to 4 million bpd by 2040.
KOC plans to drill 700 wells per year over the next few years and is nearing completion of a heavy oil plant project at the South Ratqa field and is preparing for the operation of the field and its full production.
In line with its expansion plans, KOC recently started operations at a new gathering centre, GC-31, capable of handling 100,000 bpd of crude.
GC-31, in northern Kuwait, will also process 62.5 million cubic feet per day of associated gas and 240,000 bpd of treated water, KOC said in a statement broadcast by state-owned news agency KUNA in September.
In addition, Petrofac is working on a separate gathering centre, GC-32, at Burgan, the country's largest oilfield.
The plant is expected to process 120,000 bpd of crude oil and associated gas from multiple oilfields.
In 2018, KPC revealed plans to increase production capacity to 4.75 million bpd by 2040, but those plans have since been revised, with KOC now aiming to reach 4 million bpd capacity by 2040.
The nation presently has a production capacity of 3 million bpd but is said to be producing about 2.43 million bpd in line with Opec+ restrictions, Upstream understands.
Close to 90% of Kuwait’s annual fiscal revenue comes from oil production, and experts believe that without “credible substitute diversification measures” the country will continue to be dependent on oil and gas resources in the coming years.
However, Fitch says oil export revenues will be critical to help implement the government’s New Kuwait vision.
Kuwait’s Vision 2035 aims to diversify the nation’s economy and reduce its reliance on oil while transforming Kuwait into a financial and commercial hub.