State energy firm drops plans to use foreign oil majors

02 December 2009

Kuwait Oil Company will hire contractors to develop northern fields

State energy firm Kuwait Oil Company (KOC) is to hire contractors to develop heavy oil production facilities at its northern oil fields, rather than international oil companies as originally planned.

Senior sources close to KOC say the policy U-turn is being made to avoid political opposition to its plans to hire oil majors to extract heavy oil from the northern fields of Adbali, Ratqa, Raubhatain and Sabriyah.

The scheme is as part of the wider ‘Project Kuwait’ programme, which KOC drew up in 1997. Under its original plans, KOC wanted oil majors to operate and manage production from the northern fields in return for set fees. However, parliamentary opposition has repeatedly stalled contract awards on associated schemes, as some politicians claim the oil majors’ contracts contravene the country’s constitution by giving foreign firms full ownership of Kuwait’s oil reserves.

By hiring contractors, the fields will remain in Kuwaiti ownership throughout the lifespan of the project to boost production.

“KOC saw that the development was not going anywhere in parliament,” says one IOC executive close to the decision. “It is quite clear that KOC is desperately trying to get its plans into production and, while it would use the oil companies if it could, there is an immediate need to meet targets.”

KOC will tender a front-end engineering and design (Feed) contract for the scheme in January 2010, according to two senior advisers to the company.

It plans to select one of the three engineering contractors it already uses as in-house engineering consultants: the US’ Fluor, Australia’s Worley Parsons, or the UK’s Amec.

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