Kuwait in talks with IOCs to boost crude oil production

Posted on 8th October 2014

Kuwait is in talks with five major oil companies to help boost crude production and develop some of its oilfields including Burgan, the world’s second largest, a move that has faced fierce political opposition in the past.

Kuwait oil

Kuwait has invited Britain’s BP, France’s Total, Royal Dutch Shell, ExxonMobil and Chevron to bid for a so-called enhanced technical service agreement for the northern Ratqa heavy oilfield, Hashem Hashem, chief executive of state-run Kuwait Oil Co. told Reuters on Thursday as reported by the Daily Star.

“We’ve invited the major five international oil companies to show interest. This is our approach,” Hashem said in a phone interview, adding Exxon might not be interested in this bid. “We are trying by first or second quarter of next year to conclude this contract.”

The plan is part of efforts to meet Kuwait’s target of producing 4 million barrels of oil per day by 2020. The OPEC member currently produces around 3 million bpd and exports around two thirds of that.

KOC also plans to open up other oilfields, such as its North Kuwait fields and areas of the giant Burgan field, for foreign oil companies to develop, and will send a letter to the five majors seeking their interest in bidding, Hashem said.

“We are starting first with the heavy oil and then will continue with north Kuwait and south-east Kuwait. We will take it in stages, one-by-one,” he said.

It will be the first time KOC has developed such a big heavy oil reservoir and the plan is to produce 60,000 bpd from Ratqa, which lies close to the Iraqi border, by 2018-2019 in the first phase, and then ramp it up to 120,000 bpd by 2025, Hashem said.

North Kuwait now produces around 700,000 bpd and the plan is to boost its output to 1 million bpd by 2017-2018, he said.

KOC is also working to sustain current production potential of 1.7 million bpd from Burgan, after moving ahead with a water injection project to help boost oil recovery rates, Hashem said.

Kuwait’s oil production comes mainly from a few mature fields, dominated by the Burgan field in the south of the country. Kuwait’s current capacity is around 3.25 million bpd, with KOC’s share at around 3 million bpd.

To bring the capacity up to 4 million bpd by 2020, KOC will contribute an extra 650,000 bpd. Service contracts stay within the limits of Kuwait’s constitution, which ban foreign firms from oil production in the Gulf OPEC crude exporter. ExxonMobil, Chevron and BP have all previously discussed technical service agreements with Kuwait.

Total had looked at working with Kuwait on enhanced oil recovery. Exxon signed a preliminary deal in 2007 to work on heavy oil in the country’s north. BP has looked at working in the west, while Chevron has looked at the south and east.

But political opposition to foreign firms’ taking a role in production had delayed oil developmental projects for years. Parliamentary criticism led Kuwait to cancel billion-dollar petrochemical and refining deals. After pressure from Kuwaiti lawmakers, an investigation was launched in 2011 into a gas development agreement with Shell that was awarded without competition. Hashem said such concerns had been addressed. “It is an enhanced consultancy agreement; it is within the constitution. It is not going to be a direct tender award but they [IOCs] will compete among themselves,” he said.

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