Kuwait plans $2bn heavy oil construction tender

31 March 2010

Kuwait moves ahead with plan to produce crude from northern fields

Kuwait Oil Company (KOC) has invited local and international firms to prequalify for a deal to design, build, operate and maintain temporary heavy oil handling and processing facilities in the north of the country.

The tender comes as a further sign that Kuwait intends to develop technically complex heavy oil production facilities at its northern oil fields without assistance from international oil companies (IOCs).

Contractors have been asked to submit prequalification applications to KOC by 2 May. The winning firm will be required to provide financing for the project, which could cost as much as $2bn, according to contractor sources.

The production facilities will be used used to test the viability of commercial production, with KOC leasing them from the winning contractor over an undefined period of time, likely to be five to 10 years.Permanent facilities will be built at a later date.

The project will be broken down into three parts. The first covers the construction of heavy crude oil handling facilities for thermal production techniques including steam and production flow lines. The second part will see the winning contractor build seawater treatment and water de-oiling and de-mineralisation facilities, as well as an effluent disposal system. The final package covers the operation and maintenance of the facilities.

Australia’s WorleyParsons was selected to design oil production facilities for oil fields in northern Kuwait in February. The company is working on front end engineering and design (Feed) studies for infrastructure to produce heavy crude oil from the Adbali, Ratqa, Raubhatain and Sabriyah fields (MEED 23:2:10).

KOC had originally planned to develop the fields with the help of an IOC under its long-stalled Project Kuwait scheme. The company signed a heads of agreement with the US’ ExxonMobil to work on the fields in October 2007, although no progress has been made since.

KOC seems to be rushing the project by using contractors with little expertise in heavy oil production rather than developing it using IOCs, which would bring the project under intense political scrutiny and cause delays, says one Kuwait City-based consultant with strong ties to Kuwait Petroleum Corporation (KPC).

“Eventually they [KOC] will have to bring in the IOCs,” says the source. “But there is reluctance from the IOCs to get involved as they are not allowed to book reserves [profit from the oil being produced]. I am not sure this can be resolved.”

Under Kuwait’s constitution it is illegal for foreign companies to own any of the country’s natural resources, making the traditional production sharing agreements usually employed by IOCs impossible to use.

Kuwait has an estimated 13 billion barrels of heavy crude oil reserves, located primarily in the north of the country. KOC had planned to increase production of heavy oil to as much as 900,000 barrels a day (b/d) by 2020. However, the company said in late 2009, it was only targeting 450,000 b/d from heavy oil. The number has been drastically cut again, with sources in Kuwait now saying the heavy oil target is as little as 250,000 b/d.

A MEED Subscription...

Subscribe or upgrade your current MEED.com package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.

Get Notifications