Kuwait upstream contract awards fall in 2011

27 September 2011

Only $2bn of contracts awarded so far this year

State upstream operator Kuwait Oil Company (KOC) has signed only $2.2bn-worth of contracts so far this year, compared to $3.5bn in the same period of 2010, as a result of changes in the Oil Ministry.

According to the latest data released by KOC, $49.4m worth of contracts were signed in September. This year, its most productive month was in January when the company awarded more than $650m in deals, including two oil field service contracts with the US’ Western Atlas and Dubai-based Halliburton worth more than $378m.

In 2010, KOC awarded more than $11.6bn-worth of contracts. The largest of these came in at $1.56bn and was signed by the local Kharafi National on 6 December for a deal to build early production facilities at Kuwait’s northern oil fields (MEED 5:1:11).

Kuwait’s new Oil Minister, Mohammed al-Baseeri was appointed in May and will oversee a sector with spending plans of more than $90bn over the next five years. KOC’s parent company, Kuwait Petroleum Corporation (KPC) announced that it planned to spend as much as $340bn over the coming two decades, aiming to increase the number of rigs operating in the country and pushing ahead with enhanced oil recovery (EOR) schemes, as well as increasing domestic gas production. KPC also plans to raise oil production capacity to 4 million barrels a day (b/d) by 2020.

However, sources in Kuwait’s oil sector complain that the country’s attempts to revitalise and grow the sector over the past 15 years have constantly been frustrated by political deadlock, an issue that again looks to be holding it back.

Asked why KOC appeared to be much slower this year, the reply from a number of engineering contractors in the country was simple: the shift in management.

The last major engineering, procurement and construction (EPC) deal to be approved came in August, although the $545m contract is yet to be officially signed with South Korea’s GS Engineering & Construction for a water injection facility at the Wara formation of the giant Burgan oil field.

A number of deals are still under evaluation. KOC is currently assessing proposals for another 14 deals. A long awaited clean up of Kuwait’s oil lakes worth $151m is also being evaluated.

Nonetheless, KOC has actually moved ahead with some pioneering projects. In April, it awarded a $100m contract for a pumping system at its Lower Fars Test Project (LFTP) in the north of the country. This follows a tender in September 2010 for studies to develop heavy oil sands, the first attempt to use the technique in the region and the precursor to substantial increases in heavy oil production in the country.

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