Kuwait Oil Field, World's 2nd Largest Needs IOCs
KUWAIT CITY (Zawya Dow Jones), Sept. 22, 2009
Production from the world's second-largest oil field in Kuwait may decline without the help of international oil companies to boost crude output, a member of Kuwait's Supreme Petroleum Council said.
Kuwait, which pumps about 2.2 million barrels a day of oil, has failed to renew service agreements with several international oil companies, including BP PLC (BP.LN) and Chevron Corp. (CVX), raising concern about the future output from the country's largest fields.
Kuwait's Burgan field, the world's second-largest oil field after Saudi Arabia's Ghawar field, supplies a big slice of the country's current production. Many of Kuwait's fields have been in operation for 60 years.
The greater Burgan field has a capacity, estimated at 1.4 million to 1.5 million barrels a day of oil and "that was forecast to be sustained for more than 10 years with the help of international oil companies," said Imad Al Atiqi of the Supreme Petroleum Council, the body in charge of the country's oil policy, in a recent interview with Zawya Dow Jones.
"But now without this expertise, I don't suppose this current production rate will be effectively sustained for more than five years," he added.
Kuwait's current output capacity exceeds 2.7 million barrels a day of crude, according to Atiqi. But other Kuwaiti government officials say it is near to 3 million barrels a day. Kuwait is among the top five members of the Organization of Petroleum Exporting Countries, or OPEC.
Plans to boost output to 4 million barrels of oil a day by 2020 have been slowed by parliamentary opposition to the involvement of international oil companies in developing fields as the country's constitution bans foreign investment in oil production.
Instead, Kuwait relies on oil service companies to help maintain crude production in the absence of agreements with international oil companies.
"It is not conceivable after losing all these years there is a way for sustainable growth in production," said Atiqi. "The government does not need parliament approval for service contracts, but nothing has happened."
The cornerstone of the government's plans for an oil output boost is Project Kuwait, which involves producing crude in the north of the country with the help of international oil companies. The project has been debated for over a decade with little progress.
A local newspaper last month reported that the government was planning to revive Project Kuwait and make it more acceptable to parliament. But Atiqi doubts the government can muster consensus around the project.
"It is not clear to me at this moment that parliament has the will to grant this project a priority," said Atiqi. "You have 500,000 barrels of oil in idle capacity at any time and then you ask parliament to raise capacity."
Kuwait has cut its production in line with OPEC, which decided to remove a total 4.2 million barrels a day of output from the market in a series of cuts last year aimed at shoring up oil prices, which have dropped by half since reaching a $147 a barrel peak in July 2008.
OPEC, which pumps about 40% of the world's oil, decided earlier this month to keep output unchanged, expressing satisfaction with current oil prices.
Kuwait needs to boost its crude output to help foster economic growth, which is fueled by oil revenue. The OPEC producer is the least diversified economy in the energy-exporting Gulf region, with oil income contributing to over 95% of government revenue.
Atiqi said current oil prices are likely to remain within the $60-$70 range, helping Kuwait post a surplus rather than a deficit as forecast by the government.
"Anything above $50 a barrel is above the requirements for the balance of payments," said Atiqi.
Copyright (c) 2009 Dow Jones & Company, Inc.
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