In a country that is dependent on oil production and export, Kuwait Petroleum Corporation (KPC) is a major cog in the economic machinery. Formed in 1980, it acts as a holding company for all Kuwait’s major oil, gas, and petrochemical assets, the most important of which are state oil and gas firm Kuwait Oil Company (KOC), refiner Kuwait National Petroleum Company (KNPC) and petrochemicals producer Petroleum Industries Company (PIC).

Other subsidiaries include Kuwait Gulf Oil Company, which works in the Divided Zone between Kuwait and Saudi Arabia; Kuwait Foreign Petroleum Exploration Company, KPC’s overseas arm; and Oil Services Company, which maintains some of the country’s energy infrastructure. KPC also oversees the running of the largely defunct Oil Development Company (ODC), set up to work on the long-delayed Project Kuwait upstream scheme.

KPC sets overall energy industry strategy and its chief executive officer (CEO) chooses the heads of each subsidiary, with the managing director of each firm acting in a largely independent role to meet KPC’s requirements. The Oil Ministry in turn oversees KPC and forms legislation at a sector level, while the Supreme Petroleum Council, chaired by the prime minister, is tasked with agreeing KPC’s overall strategy. The council also ratifies the award of major new contracts, the creation of new companies, and deals with international firms.

KPC’s board of directors is made up of the oil minister, KPC’s chief executive officer (CEO), the heads of the subsidiaries and individuals from the private sector. KPC’s current CEO is Farouk al-Zanki, who was previously managing director of KOC in 2010.

A major limitation for investors looking at Kuwait’s energy sector is the constitutional block to foreign ownership of the country’s natural resources. This means that international oil companies (IOCs) working in the country have been limited to operating within technical service agreements (TSAs) and enhanced technical agreements (ETSAs).

Under these deals, they help KPC and its subsidiaries work on strategy, plan new projects and maintain existing facilities. The firms working under these deals were rewarded for hitting targets, including increased production levels, but could not be offered volumes of oil or profit-shares in output. In 2009 and 2010, a number of IOCs let their TSAs lapse, largely because terms could not be agreed on ETSAs, which would have linked payment to production. However, from mid-2010 onwards, they slowly started entering into negotiations again.

Given that KOC is working on increasingly complex projects, including the production of heavy oil from the country’s northern Jurassic fields, KPC’s inability to offer attractive returns for IOCs with the technical capabilities required for heavy oil or tight gas developments has held it back. In order to overcome this, the company in 2004 created a new subsidiary, ODC, to work on more challenging developments and offer oil companies a more attractive system of remuneration

ODC is yet to start work on a major project, however, and KOC has quietly been taking over some of the Jurassic field development, which will be key to plans to boost output to 3.5 million barrels a day (b/d) by 2015 and 4 million b/d by 2020, from roughly 3 million b/d currently.

KPC units have made liberal use of international engineering firms and KOC and KNPC in particular have long offered huge, long-term (normally five years at a time) consultancy contracts to companies including Australia’s WorleyParsons and the US’ Fluor to help them plan major projects.

Kuwait Oil Company

KOC is the country’s most important firm, as it develops new oil and gas fields and maintains existing production assets. Currently led by Sami al-Rushaid, it has managed to sidestep bureaucracy by developing projects piecemeal, hiring contractors to work on schemes it plans centrally with engineering firms and rarely awarding contracts worth more than $100m, the level at which Supreme Petroleum Council ratification is required.

The company has been working on a series of early production facilities built under quasi public-private contracts to test the viability of new oil and gas projects. It is also working on revised plans to collaborate with UK/Dutch Shell Group on the development of a number of complex gas fields in the north of the country. However, in May the oil minister, under pressure from opposition politicians, referred the Shell deal to the public prosecution for examination.

Kuwait National Petroleum Company

The firm oversees the operations of Kuwait’s three refineries: Mina Abdullah, Mina Ahmadi and Shuaiba. It is in charge of the construction of a new $10-15bn refinery at Al-Zour. KNPC is also planning a $15bn revamp of the existing refineries as part of the Clean Fuels Project, which aims to bring fuels produced in the country up to international standards. The company’s chairman and managing director is Fahed Salem al-Ajmi, who took over in June 2011.

Petroleum Industries Company

A KPC subsidiary, Petroleum Industries Company (PIC) is the holding company for all state-owned petrochemical assets. Its main subsidiaries include Kuwait Olefins Company, Kuwait Aromatics Company and Kuwait Styrene Company. It is also a partner in two joint ventures with the US’ Dow Chemical in UAE-headquartered monoethylene glycols producer MEGlobal and the poyethylene terepthalate manufacturer, Equipolymers. The pair also run a marketing and distribution firm, Equate Marketing Company, which markets all of the petrochemicals produced in Kuwait. PIC’s managing director and chairman is Maha Abdulrahman Mulla Hussain.

PIC plans to build a major ethane cracker and new polyethylene and glycols units at Al-Zour, along with a new ethanolamines plant. It is also looking at the possibility of building new purified terepthalic acid and polyethylene terephthalate plants alongside Kuwait Aromatics Company’s existing production assets.

Kuwait Gulf Oil Company

The firm works in partnership with Saudi Aramco on production schemes in the Divided Zone. The two are equal partners in Al-Khafji Joint Operations Company, which is responsible for about 500,000 b/d of production, of which KGOC receives half. Hashim al-Rifai is the firm’s chairman and managing director.

Tenders

KPC companies all tender sub-$100m contracts via online tendering systems (accessible through their websites). Bigger contracts are announced in a weekly gazette, providing details of who to contact in order to bid. Financial bids for bigger contracts are opened after a series of technical bid rounds and the lowest bidder normally wins the deal. The country’s Central Tenders Committee assesses major bids.