Kuwait can afford to stall oil projects

28 August 2009

Nationalist politicians want, rightly, to guard the country’s enormous natural wealth

Kuwait currently has little need for extra capacity to produce oil. The emirate has the ability to produce 3 million barrels a day (b/d) but, as a member of the Organisation of Petroleum Exporting Countries (Opec), it is forced to limit its production its 2.2 million-b/d quota.

Even if the small, rich Gulf state were to be in a position to produce more, financially it has no need. National Bank of Kuwait predicts that even with Opec restrictions, Kuwait will run a fifth successive multi-billion-dollar budget surplus in 2009, expected to be about KD6bn ($21bn). The state can support its 1 million nationals with ease.

Nevertheless, Kuwait Petroleum Corporation plans to increase its upper production threshold by 1 million b/d over the next 10 years, targeting a capacity of 4 million-b/d by 2020. The state energy giant predicts that international demand for oil will grow in the next decade, and wants to capture as large a market share as possible.

Part of the 2020 production plan is based around the ambitious multi-billion-dollar Project Kuwait to develop the country’s five technically complex northern oil fields. The involvement of international oil companies is likely to remain minimal, however.

Nationalist politicians want, rightly, to guard the country’s enormous natural wealth, and refuse to let foreign firms own any of its oil reserves.

They have a point. If Kuwait has enough money to look after its modestly sized popu-lation, it can live without new oil and gas mega-projects and the international oil com-panies needed to work on them.

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