Background

Kuwait Petroleum Corporation (KPC) traces its history back to the early 1930s, when Anglo-Persian Oil Company, known today as the UK’s BP, and Gulf Oil, now Chevrolet of the US, formed a joint venture to search for oil in the emirate. Named Kuwait Oil Company (KOC), the firm made its first discovery in 1938 at the giant Burgan field, which continues to be one of the country’s most important assets. In 1960, the government established its own refining and fuel trading firm, Kuwait National Petroleum Company (KNPC), which built a refinery at Shuaiba. In 1964, the government also started its first petrochemicals joint venture, Petrochemical Industries Company (PIC).

In 1973, Kuwait bought out its partners to take full control of PIC, moving to nationalise KOC in 1975. In 1978 and 1980 the government nationalised the two main oil refineries it did not own, at Mina al-Ahmadi and Mina Abdullah. In 1980, KPC was formed as a holding company to oversee operations at all of the country’s oil, gas, refining and petrochemicals firms.

Role in Kuwait’s economy

As the state oil producer, KPC is a hugely important player in the domestic economy. Oil and gas accounted for 94.5 per cent of all exports in 2012, providing the government with 76 per cent of its annual revenues and making up more than half of all economic output. KPC also provides cheap fuel and feedstocks, helping to make Kuwaiti businesses more competitive internationally.

Role in the global economy

KPC is the world’s eighth-largest producer of oil and a key member of the oil producers’ club Opec.

Strategy

The firm’s domestic ambitions, especially with respect to its ageing refineries, are tempered by the country’s volatile political scene, which has seen KPC struggle to get the parliamentary approval it needs to move on major new projects. In 2013, the company was ordered to pay $2.2bn to the US’ Dow Chemical after a joint-venture plan failed five years earlier due to political infighting.

Nevertheless, KPC is still aiming for a production capacity of 4 million barrels a day by 2020. It also hopes to build a major new refinery at Al-Zour and overhaul its existing refineries to bring them up to international standards. To increase its footprint abroad, the company is building a new refinery in China with China Petroleum & Chemical Corporation (Sinopec). KPC’s subsidiary Kuwait Foreign Exploration Company (Kufpec) has recently taken on a new concession in Yemen and has spoken of its desire to expand production in southeast Asia. In March 2013, Kufpec agreed a $750m loan with a local bank to fund its activities.

Concessions

Under Kuwaiti law, it is more or less impossible for KPC to award exploration and production concessions to foreign companies. Negotiations over Enhanced Technical Service Agreements, which would work in a manner similar to production-sharing agreements, have stalled since the first deal was awarded to UK/Dutch Shell in 2011.

KPC is the world’s eighth-largest producer of oil and a key member of the oil producers’ club Opec