Kuwait's new emir to ensure business as usual in energy sector

The change of guard in Kuwait with the passing of emir Sheikh Nawaf al-Sabah and the appointment of Crown Prince Sheikh Mishal al-Sabah as his successor is set to ensure continuity in the OPEC crude producer, grappling with a stagnant energy sector in a fast-transitioning world.

Sheikh Nawaf passed away Dec. 16, the emiri court said, following a short tenure of three years marked by ill-health.

OPEC's fourth-biggest oil producer with the world's seventh-largest reserves will "continue with its plan," said Bader al-Saif, assistant professor of history at Kuwait University.

"Successions have been orderly and do not impact many changes in energy policy that's usually left for technocrats to sort," he added.

The incoming emir Sheikh Mishal, who has been overseeing Kuwaiti diplomacy and representing the late emir for the last two years, will step into the new role when the country has been lagging in developing its energy industry compared to regional peers.

Kristian Ulrichsen, Middle East fellow at the Baker Institute, noted that since Sheikh Mishal has been the de facto ruler since 2021, "it is a given" that the country's energy industry will see "continuity of existing policies as well as challenges."

Among the challenges facing Kuwait is the struggle to raise crude production capacity to desired levels before peak demand and well in advance of the midcentury global net-zero deadline.

Kuwait revised its plans for crude production capacity in October, aiming for 4 million b/d by 2035 and 2 Bcf/d of non-associated gas by 2040. The capacity additions will come from its domestic fields as well as the Neutral Zone it shares with Saudi Arabia.

The country's stated production capacity is 2.9 million b/d of hydrocarbons, while output -- restrained due to the OPEC+ cuts -- was 2.55 million b/d in November, according to the latest Platts survey by S&P Global Commodity Insights.

Kuwait's plans to add fresh capacity would have to overcome challenges presented by the country's stagnant politics, a lack of foreign investment and aging oil fields.

Political troubles

Kuwait has witnessed numerous cabinet reshuffles and change of government in one of the more democratic Persian Gulf oil producers. This revolving door of cabinet appointments has left incumbents little time to implement policies to push forward development of the country's oil and gas fields.

Following the appointment of a new ruler, Kuwait will have to next decide a Crown Prince to replace Sheikh Mishal with the current prime minister Sheikh Ahmed al-Sabah seen as a viable successor for the role, Kamil al-Harami, an independent oil analyst in Kuwait, said.

"The oil industry is in a very bad shape. I hope the government comes with a strong Prime Minister with a real vision otherwise I think we'll have the same status quo. No changes," he said.

Upstream challenges

Kuwait's upstream sector requires significant investments with the country's main asset the Greater Burgan oil field facing natural decline. Any addition to production capacity simply offsets the ongoing decline at the world's second-largest oil field.

The field is already producing close to capacity -- 95% of its full potential -- with current output of around 1.6 million b/d sustained by enhancing recovery via gas injection and water flooding.

The Neutral Zone is another potential source of capacity additions. However, operational challenges and Kuwait's political reshuffles have hindered any serious development of the shared fields, which only restarted in 2020 after a hiatus of more than four years due to a dispute between the two neighbors.

The country is also involved in a dispute with Iran over the development of the offshore Durra field, which Kuwait shares jointly with Saudi Arabia.

Kuwait's new emir will have to continue mediation with Tehran, which has threatened to do exploration work in its share of the field. Kuwait has been vocal about ensuring international law governing matters of exploration and calling for proper delineation of rights.

Transition blues

Kuwait, a state where oil accounts for 90% of government revenue, also faces the prospect of being left behind by its regional peers when it comes to energy transition.

During the COP28 UN climate talks in Dubai, Kuwait said it would not back a critical text calling for the phasing out of fossil fuels.

OPEC secretary general Haitham al-Ghais who is Kuwaiti also urged producers not to back the text in a letter sent to its members during climate negotiations. The UAE Consensus that was adopted eventually called on countries to "transition" away from fossil fuels and triple renewable capacity, which is non-existent in Kuwait.

During its overhaul of strategy announced in October, state producer Kuwait Petroleum Corp. outlined plans to develop technology, including carbon capture utilization and storage, as part of goals to reach net-zero Scope 1 and Scope 2 greenhouse gas emissions by 2050.

KPC is considering green hydrogen, second-generation biofuels, renewables and storage, recycled plastics, flaring energy efficiency, advanced mobility and retail, and carbon offsetting under its strategy. However, it did not mention specific plans and timelines.

"The green hydrogen, carbon capture, we need to develop," Harami said. "The ruler, if he has a very strong vision, would help."