INTERVIEW: Kuwait plans to boost oil output capacity with possible IOC partnerships

Kuwait Oil Co., which is responsible for exploring, developing and producing the country's hydrocarbon resources, is targeting an increase in oil production capacity by the end of this year and into the next several years, with the possibility of forming partnerships with international oil companies to reach the goals, CEO Ahmad al-Eidan told S&P Global Commodity Insights.

KOC's oil production capacity, now at 2.6 million b/d, will reach 2.7 million b/d by the end of this year with sustainable production capacity climbing to 3.2 million b/d by the 2025/2026 fiscal year, Eidan said in a written response to questions from S&P Global. Part of the increase will come from Kuwait Gulf Oil Co.'s share of production from the Neutral Zone, which is shared with Saudi Arabia.

He did not provide any figures for current or near-term output from the Neutral Zone, but did say output was expected to increase to 350,000 b/d by 2035.

Meeting targets will require engagement with IOCs, he said.

"KOC is looking into options which can improve international oil companies' partnerships with KOC," the CEO said. "The objective is to improve the effectiveness of their role in the development of KOC's oil and gas portfolio."

KOC operates under the umbrella of Kuwait Petroleum Corp., established in 1980 to oversee all of the country's operations in oil production, processing and transportation. Kuwait's oil production has declined this year through July to average 2.65 million b/d from 2.7 million b/d last year, according to the monthly Platts OPEC survey by S&P Global. It was 2.44 million b/d in 2020 when COVID was emerging and fell to an average 2.41 million b/d in 2021.

"KOC is still committed to achieving the growth targets as established in the company's 2040 strategy," Eidan said. "However, due to delays caused by the pandemic, the production profile has been affected. Despite this, we are confident in KOC's ability to recover to the planned target."

Kuwait's often changing government, which is one of the more democratic among Gulf oil producers, is not seen as a barrier to growth. "Our plans are definitely impacted when the government resigns, but because we are a 'strategy-driven company' decisions are mainly made on the basis of technical reviews and considerations, Eidan said. "We therefore view the impact as minimal."

Kuwait Oil has put forward a "comprehensive" expansion plan involving drilling and well maintenance, in addition to building and upgrading the company's capabilities to enhance reservoir pressure and surface water handling, he said. The expansion plan includes the 100,000 b/d increase in production by the end of this year, he said.

The opening of the 615,000 b/d Al-Zour refinery, which is still ramping up to full capacity, means more oil production will be used domestically, rather than exported.

New refinery needs

"Domestic upstream, and mainly KOC, will supply the refinery with its needs from the different crude types," the CEO said. "The addition of Al-Zour will definitely increase the allocated crude to domestic refineries and will increase the refining capacity of Kuwait."

An increase in petrochemicals production is also planned under KPC, including the introduction of new products "while strengthening the integration with the refining businesses and investing in new plants."

Renewable energy is considered an "assistant factor" to stabilize the energy market, he said, putting renewables at 8% of energy demand compared with oil's 35% share. "We are not worried about the future of our oil industry and we are certain this industry will be the main player in the energy market for many years to come," he said.

In terms of crude qualities, Eidan said that "for any new fields in the future, if the quality of these fields are different, strategies will be developed to ensure the highest quality of crude grades are maintained."

He noted that in May 2020, KOC introduced "Kuwait South Ratqa Crude," which is a heavy crude with a gravity of around 14 API and produced from the South Ratqa field in north Kuwait. "The development of South Ratqa heavy crude did not affect the quality of our other streams, because we established it as a segregated stream with separate production and export systems," he said.

He also highlighted that KOC established production of light oil back in 2008 with the commissioning of the first phase of the Jurassic resources development project in north Kuwait. Light oil production currently stands at about 140,000 b/d, under a brand name "Kuwait Super Light Crude" with a gravity of about 49 API, he said. It is "well established" in the market now, he added.