|
(Last updated: 31 Jul 2007)
Trends and opportunities
The market
Kuwait State has a population of 2.4 million, with a landmass of 17,820 square kilometres and a per capita gross domestic product (GDP) of US$21,300.
Kuwait has an open oil-rich economy with vast reserves of crude oil – an estimated 94 billion barrels of recoverable reserves or around 9.4 per cent of the world’s total known reserves. Kuwaiti oil is somewhat heavier than Saudi crude, and has higher sulphur content. Oil revenues represent 95 per cent of total export earnings.
Oil was discovered in 1938 by the Kuwait Oil Company (KOC), then, jointly owned by British Petroleum (BP) and Gulf Oil. Production began in 1946 and peaked at 3.3 million barrels per day (b/d) in 1972, at which point an output ceiling of 2m b/d was introduced for the purpose of conservation. The Kuwait Oil Company (KOC) was fully nationalised by 1975.
The industry was reorganised in the late-1970s and foreign interests were acquired in the 1980s, notably the US oil engineering and exploration firm, Santa Fe International.
The Kuwait Ministry of Oil supervises the industry and the major controlling bodies, which are:
- Kuwait Petroleum Corporation (KPC) as the overall coordinating body
- Kuwait Oil Company (KOC) carries out exploration and crude production
- Kuwait National Petroleum Company (KNPC) manages refineries and domestic marketing
- Kuwait Oil Tanker Company (KOTC) undertakes transportation
- Petrochemicals Industries Company (PIC) produces petrochemicals
- Kuwait Foreign Petroleum Exploration Company (KUFPEC) handles exploration of oil overseas
- Kuwait Petroleum International (KPI) manages downstream operations in Europe
- Kuwait Aviation Fuelling Company supplies fuel to aircraft that use Kuwait International Airport
- Santa Fe International Corporation provides expertise in exploration, drilling, pipelines, etc. and
- Santa Fe's wholly-owned subsidiary, C.F. Braun & Company, provides refinery-engineering services
Kuwait has some three major domestic refineries with a total capacity of around 900,000 b/d. A new plant, near Kuwait City, is being commissioned and is due to come online in 2010 adding 600,000 b/d.
Kuwait holds equity interests in oil production through the Kuwait Foreign Petroleum Exploration Company (KUFPEC) in countries such as Algeria, Australia, China, Congo, Egypt, Indonesia, Pakistan, Thailand, Tunisia and Yemen.
Opportunities
The Kuwait Government and the Kuwait Petroleum Company (KPC) are undertaking considerable investment in oil and gas production and refinement capability up to 2025.
The government and the KPC have stated that the main objectives centre around:
- Increasing oil production (domestically and internationally) to a target of 4 million barrels per day (b/d) by 2020
- Increasing refinement capacity
- Increasing liquid petroleum gas production
The KPC estimates that the capital cost of meeting the strategic goals is US$55.7 billion over 20 years. In the next five years, KPC will focus on delivering the following specific key activities and projects:
- Construction of new crude exportation facilities in the Northern and Southern tank farms and at Mina Al Ahmadi and tanker fuelling facilities
- Increasing the production capacity of Gathering Centre No 28
- Installing a gas pressure unit and treatment unit for medium humidity crude oil in the West of Kuwait
- Installing waste water disposal facilities Phase 2, in South-East Kuwait
- Building a new Gathering Centre, No 24 in the Sabriya field, in the north of Kuwait
- Increasing the productivity of Booster Station No 131 - Phase 2, in the north of Kuwait
- Drilling a large number of wells in all the Kuwait oilfields
The KPC have nominated to undertake the following projects in pursuit of petrochemicals activity expansion:
- The Aromatics project
- The second Olefins project
- The Styrene project
- The Poly-Styrene project in Asia
The KPC has a stated goal of achieving higher private sector involvement in the Kuwaiti oil and gas sector. Their actions toward fulfilling this goal include privatising (in part or whole) downstream oil assets or soliciting private sector investment in the following areas:
- Local marketing activities
- Oil blending activities
- Coke calcining
- Future petrochemical projects
- Refinery construction
- Engineering works, contracting and support services
- Transformational industries
In regard to Kuwait ’s upgrade of its oilfields and domestic refineries, and development of its gas production capability, Australian companies can examine opportunities and participate in KPC tenders especially in the following areas:
- Ongoing oil well development and pipeline work, and the associated services and materials required
- Gas plant development
- Ongoing maintenance shutdown and upgrade of existing refineries and plants
Competitive environment
Prospective Australian suppliers will face strong competition from American, European and Asian companies that are already well established in Kuwait.
Major design, engineering and project management contracts are normally awarded to large foreign firms (with a local partner/sponsor). Many construction subcontracts and limited scope engineering/design contracts are awarded to local firms, which generally employ expatriates at all levels to execute the project.
Local Kuwaiti and other Gulf Cooperation Council (GCC) suppliers and contractors receive a 10 per cent price preferential over foreign suppliers and contractors.
|