Politics deter Kuwait oil projects

22 November 2012

State-owned Kuwait Oil Company is looking to increase oil production, but fractious politics and a lack of expertise will hamper the plans

State-owned Kuwait Oil Company (KOC) is spearheading a new drive to hit production capacity of 4 million barrels a day (b/d) by 2020, and could soon launch a $7bn scheme to develop the country’s heavy oil resources. Its success is dependent on overcoming a fractious political scene and technical inexperience.

Kuwait hopes to bring on the first phase of production by 2017, with 60,000 b/d and as much as 270,000 b/d by 2030. But the technologies and expertise needed to develop the resources are new to KOC.

Upstream inexperience will not be the only obstacle. While the Oil Ministry will push hard to get projects going and plans to spend more than $46bn over the next five years, the sector remains highly politicised. In early December, Kuwaitis will vote for a new parliament after the outcome of elections in February was overturned. The new parliament looks set to follow the pattern of previous elected bodies, challenging the government’s decisions on major projects at every opportunity.

The new parliament looks set to follow previous bodies, often challenging government decisions

Progress has already been delayed on a number of other oil schemes, such as the $15bn New Refinery Project. Kuwait signed a preliminary agreement with the US’ ExxonMobil in 2007 to help develop its heavy crude deposits, which total some 13 billion barrels, but the agreement has since collapsed, leaving KOC to proceed alone, relying even more on international firms to provide technical support for the development of its existing northern facilities.

Kuwait is still waiting for talks to conclude on a technical assistance deal with an oil company on the heavy oil development, which was supposed to be finalised years ago. But there is little sign that progress has been made to reach a solution that will allow KOC to meet its objectives without conflict with the constitution, which forbids any foreign firm from owning any of its natural resources.

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