Kuwait oil minister retains post with additional duties in new cabinet

Kuwait's oil minister Mohammed al-Fares, who resigned in November following a cabinet-wide walkout, has been reappointed to the post with additional duties amid plans by OPEC's fourth largest producer to boost reduced oil production capacity.

Fares was also named a deputy prime minister and was given the new portfolio of renewable energy, besides the electricity and water industries duties, Kuwait News Agency reported Dec. 28, citing a decree by Emir Sheikh Nawaf al-Ahmed al-Sabah for the formation of a new 15-member cabinet. He had taken on the water and electricity portfolio in a previous cabinet formation.

Fares was appointed in December 2020, becoming the fifth oil minister in six years.

The position of Kuwait's oil minister has seen frequent reshuffles amid various cabinet resignations over the past few years.

Fares, who had no prior energy experience, led the ministry through the oil market's recovery during the pandemic, amid an alarming drop in the country's crude production capacity.

State-owned Kuwait Oil Co. said in its latest annual report released October that its maximum sustainable production capacity had fallen to 2.58 million b/d as of March 31, down 572,000 b/d from 2018.

Fares had responded by saying Kuwait was targeting a 2025 capacity of 3.5 million b/d, rising up to 4 million b/d by 2035 -- a significant downgrade from the 2018 plan to have 4 million b/d by 2020 and 4.75 million b/d by 2040.

Neutral zone fields

Analysts have cast doubt on the latest production targets, citing political instability and frequent turnovers at the oil ministry and state-owned oil companies. S&P Global Platts estimated Kuwait produced 2.53 million b/d in November, in line with its quota under the OPEC+ supply accord.

Kuwait and neighboring Saudi Arabia are working to increase crude oil production at the Neutral Zone fields that could be a key source of additional barrels, as OPEC+ spare capacity is expected to tighten significantly in 2022.

"Coordination is currently underway between companies operating in the divided area and the submerged area adjacent to it," the two countries said Dec. 10 in a joint statement, as Saudi Crown Prince Mohammed bin Salman capped off a tour of Gulf Cooperation Council countries with a visit to Kuwait.

Crude production in the Neutral Zone's onshore Wafra and offshore Khafji fields has suffered from technical challenges stemming from their lengthy closure, sources have told Platts, with output ranging from below 200,000 b/d in some months to as high as 270,000 b/d. The fields typically produced a combined 500,000 b/d prior to their shutdown in the mid-2010s.

Fluctuating output

The Neutral Zone may be counted on for incremental supply, as the OPEC+ alliance intends to phase out production cuts by late 2022 and global oil demand recovers from the pandemic. Platts Analytics forecasts that output will be capped at 250,000 b/d through 2022 due to the operational setbacks.

Crude exports from the Neutral Zone in 2021 have ranged from a low of 158,000 b/d in August to a high of 257,000 b/d in November, according to Kpler shipping data.

The outflows have been to India, China, South Korea, and the US, with Japan and Thailand also taking some cargoes in recent months, the Kpler data showed.

The Neutral Zone fields, which lie in an onshore and offshore territory shared by Saudi Arabia and Kuwait at their border, were offline for more than four years until 2020, due to a political dispute that was resolved with a signing of an agreement in December 2019.

Production in the zone is divided evenly between the two countries.

The offshore Khafji is operated by Saudi Arabia's Aramco Gulf Operations Co. and Kuwait Gulf Oil Co., while the onshore Wafra is operated by KGOC and Saudi Arabian Chevron.