Shell signs Kuwaiti gas field deal

18 February 2010

International oil company to help state firm develop and manage Jurassic fields

The UK/Dutch Shell Group has become the first international oil company (IOC) to sign an enhanced services deal in Kuwait after similar contracts were allowed to lapse in 2008 and 2009.

The European energy major signed the enhanced technical service agreement (ETSA) at the offices of state oil and gas developer Kuwait Oil Company on 17 February, according to a Shell statement issued on the same day.

Under the deal, Shell will help KOC develop and manage the northern Jurassic gas fields. The technically complex project will result in the two firms producing undisclosed volumes of non-associated gas from the fields.

KOC and Shell were unavailable for comment on the length of the contract or how it would be integrated with a $1.2bn deal to build early production facilities at the northern fields, which is currently being tendered.

The deal is the first of a new generation of service agreements which have been under negotiation since 2006. All of the IOCs working in the country let their existing technical service agreements lapse. US major Chevron closed its Kuwait office in July 2009 after failing to reach agreement over a new deal.

Technical services agreements between KOC’s parent company, the Kuwait Petroleum Corporation, and international energy majors, including the UK’s BP, Shell and France’s Total, all expired between August 2008 and July 2009. Senior IOC executives told MEED in 2009 that they had little hope that new deals would be concluded largely because of political opposition to their presence in the country (MEED 3:9:09).

In October 2007, KOC and the US’ ExxonMobil Corporation signed an initial enhanced technical services agreement to develop heavy oil reserves at the northern Lower Fars field. However, this has not resulted in a full contract award. Sources close to the deal say the terms on offer were insufficiently lucrative for Exxon.

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