State-upstream operator Kuwait Oil Company (KOC) is planning a raft of new engineering, procurement and construction (EPC) projects as part of its $46bn capital expenditure programme over the next five years.

The projects will include the construction of three new crude oil gathering centres, as previously reported by MEED, but will also add a new water treatment facility in the north of Kuwait, as well as two new major pipelines. The planned capital project investment also covers the landmark development of heavy oil resources, according to sources close to the company.

The three new crude oil gathering centres (GCs), numbered GC-29, 30 and 31 will be designed to produce a maximum of 100,000 barrels a day (b/d) of crude oil along with 60 million cubic feet a day (cf/d) of associated gas, along with 240,000 b/d of produced water in the north of the country.

The new water centre, which will have a capacity of 100,000 b/d, is intended to cover the shortfall of supplies from GC-190 and guarantee continuous supplies for washing and fire-fighting at KOC’s northern facilities. The project will also include provisions for the supply of potable water to the facilities.

Two major pipeline deals are also planned. The first is a new 48-inch crude oil transit line. This will act as a standby line to the only pipeline currently transferring crude oil from a manifold in the north to the central mixing manifold (CMM), approximately 121 kilometres away, before splitting to two tank farms. The new pipeline will follow the existing line’s route. Contractors in Kuwait estimate the cost of construction at more than $200m. The second scheme covers the construction of a series of pipelines with a total length of about 350km to supply 615,000 b/d of crude oil and 300 million cf/d of gas feedstock to Kuwait’s planned new refinery at Al-Zour in the south of Kuwait.

The most important of the schemes is the first phase development of the Lower Fars reservoir, upon which the country’s future heavy oil ambitions rest. Estimated at $7bn, the Lower Fars scheme is easily the largest and most ambitious project in Kuwait’s upstream sector in decades.

The formation is a deep and heavy store of crude that requires specialist technology to produce. The project will be a major milestone in meeting the government’s 2020 strategy targets of producing about 60,000 b/d of heavy oil by 2017 or 2018, before eventually lifting capacity to 270,000 b/d by 2030.

The first phase of the development covers the drilling of hundreds of wells and data collection, as well pilot schemes using various extraction methods. It will start with cyclic steam stimulation (CSS), followed by steam flood technology for higher recovery and a longer production plateau. The development of Lower Fars represents the first use of enhanced oil recovery (EOR) techniques for a commercial project in Kuwait. As such, the scheme will present major challenges for KOC and its contractors. Aside from the specialised experience and equipment needed for heavy oil and water treatment, the location of the project is remote, with no existing infrastructure.

The front-end engineering and design (feed) for phase 1 has been completed by Australia’s Worley Parsons. It will involve the construction of plant buildings, pipelines and flowlines, which will be awarded on a lump-sum turn-key (LSTK) basis. The scope of work covers three major packages. The first includes a central processing facility (CPF), which will house a water treatment plant and hazardous waste disposal plant for effluent water. The second package covers export facilities, which include a 24-inch diameter, 165km oil export pipeline to the south tank farm at Al-Ahmadi, as well as infield pipelines. It also covers a 110km water supply pipeline from the Sulaibiya wastewater treatment plant on the Gulf to the CPF. The final package covers the construction of a production support complex.

Kuwait signed a preliminary agreement with US oil major ExxonMobil in 2007 to help develop its heavy crude oil deposits, which total about 13 billion barrels. The agreement with ExxonMobil, however, has since collapsed, leaving KOC to proceed on its own, relying even more on international engineering firms to provide technical support for the development of its existing northern oil production facilities.

According to contractor sources in Kuwait, potential EPC contractors will be asked to form a joint venture with an experienced technology vendor. “Because of the complexity of the project, dealing with heavy oil and sand, having a single contractor would be difficult”.

In April 2011, the US’ Weatherford was awarded a $100m contract to build a pilot project at Lower Fars.

Kuwait is still waiting for talks to be concluded for a technical assistance contract with an international oil company on the heavy oil development that was supposed to be concluded some time ago. There is little sign that progress has been made to reach a solution that will allow KOC to meet its objectives without conflict on the country’s constitution, which forbids any foreign firm from owning any of its natural resources. Parliament has looked to block virtually every attempt by KOC to bring in outside help.

 

KOC Capital project plan
(2013-2018)
Scope
Crude oil gathering centres (GCs) Three new GCs with a capacity of 100,000 b/d each and 60 million cf/d of gas at Kuwait’s northern oil fields
Water centre Capacity of 100,000 b/d in north Kuwait to guarantee continuous wash & fire-water supply to current and future upstream facilities, as well as potable water supplies.
Crude transit line 48-inch diameter pipeline will run at least 121-km from North Kuwait to Central Mixing Manifold (CMM)
Refinery feed pipeline Will supply crude oil and gas feedstock to planned New Refinery Project. The pipelines will originate from CMM and South Tank Farm at Al-Ahmadi.
Lower Fars heavy oil development New production facility with a capacity of 60,000 b/d. Includes central processing facility, water treatment plant, substation, water, oil and fuel gas pipelines and a production support complex.
Drilling Around 1,000 new wells to be drilled and completed by 2017
Source: KOC, MEED