December was a disappointing month for upstream contract awards in Kuwait, capping off another slow year for the sector.
State upstream operator Kuwait Oil Company (KOC) made just one award in December, valued at $10.4m.
In November 2012, KOC had awarded 15 deals worth more than $529m, according to the latest figures by the oil company.
In 2012, $3.16bn-worth of upstream contracts was awarded, a marked improvement on the $2.57bn awarded in 2011. This is still a long way below the peak of $11.6bn that KOC awarded in 2010.
Of the 144 deals signed in 2012, only 12 have been worth more than $100m. About 16 contract awards, or 31 per cent of the total, were engineering, procurement and construction (EPC) deals. The bulk of investment went to drilling and exploration contracts, which contributed just over $1bn of KOC’s spending.
The single contract award in December, won by Dubai-based CMG Middle East, covers the lease of computer modelling software for the exploration and production control team. The deal mirrors KOC’s spending pattern in 2012, where EPC has taken a back seat to drilling and exploration.
The largest contract of the year was awarded in October to South Korea’s SK Engineering & Construction for the construction of elevated substations in the southeast of the country,a contract worth KD109.4m ($384m).
This was followed in November by a KD55.9m contract awarded to the local Mechanical Engineering & Contracting Company for high pressure flowlines at the Jurassic gas fields in the north of Kuwait.
The third-largest deal of the year came in June, with South Korea’s Daelim Industrial winning the contract for the installation of a telemetry system across KOC’s entire consumer network, worth $195m.
The next two to three years could be significantly better for the upstream operator, with a number of major projects currently in their early stages and yet to be tendered. These include the construction of three new oil gathering centres, a new water centre and two major pipeline deals.
There is also the first-phase development of the Lower Fars reservoir, upon which Kuwait’s hefty oil ambitions rest. Estimated at $7bn, this will be the largest and most ambitious scheme in the country’s upstream sector in decades. The front-end engineering and design (feed) for phase 1 has already been completed by Australia’s WorleyParsons. The work covers three major packages; a central processing plant, export facilities, pipelines and tank farms, as well as a production support complex.
However, Kuwait’s recent history of political obstacles hindering its oil sector’s development could see KOC’s spending remain stagnant compared to its regional rivals. It is unlikely that the sector will see the kind of spending witnessed in 2010.