Energy & Mining
With some of the largest proven oil reserves in the world, Kuwait is a global energy leader focused on the responsible extraction of its natural resources. Ranked sixth in the world in terms of proven global oil reserves, Kuwait is an oil powerhouse. However, since 2009 excessive domestic energy consumption has forced Kuwait to become a net importer of natural gas, prompting many in the country to start considering more sustainable energy sources and less profligate usage.
The country also cut production in January in line with an OPEC supply cut agreement, going from 2.838 million bpd in baseline production in October 2016 to 2.707 million.
Oil & Gas
According to BP’s Statistical Review of World Energy 2016, Kuwait has 101.5 billion barrels of proven oil reserves, representing nearly 14 billion tons of oil, and a reserve to production (r/p) ratio of 89.8. Additionally, in 2015, Kuwait produced, on average, 3.09 million barrels of oil a day, a rate that represents a 1.1% decline from 2014 production levels. As of January 2017, Kuwait is producing just over 2.7 million bpd, down from 2.838 million in October, an OPEC-orchestrated cut agreed in November aimed at pushing up the price per barrel. And in that respect, Kuwait isn’t going it alone; neighbor Saudi Arabia also cut production in January by 486,000bpd to its 10.058 million bpd target. Other countries taking steps include the UAE and Iraq.
Back on the home front, consumption stands at around half a million bpd, with slight growth registered in recent years. In 2015, oil throughput was roughly 910,000 barrels a day, representing 3.1% growth from the year before.
Downstream value creation has remained relatively stable in recent years, and refinery capacity has remained flat for the last decade, with Kuwaiti producers capable of producing 935,000 barrels a day. According to OPEC, Kuwait’s annual petroleum exports are worth nearly USD48.8 billion, and it exports more than 1.9 billion barrels of oil and more than 739,000 barrels of other petroleum exports per day. Looking more deeply at exports, the majority of Kuwait’s good stuff ends up in the Asia Pacific, a region that is the destination of 80% of Kuwaiti crude exports. Zooming in further, South Korea receives about 21% of the total, with China on 16% and Japan on 12%. And in other news from January, Kuwaiti crude exports to China edged down 1.8% from a year earlier to 253,000bpd, although shipments exceeded 250,000bpd for the third consecutive month, according to the Administration of Customs. China’s imports of crude jumped 27.5% in January YoY to 8.05 million bpd as it increased the quota for non-state imports in 2016 and gave private refineries the green light to directly import crude oil, according to the Kuwait Daily News.
Heading back downstream, and on a technical note, a wide variety of refining techniques are in place in Kuwait, including vacuum distillation, thermal operations, catalytic cracking, catalytic reforming, catalytic hydrocracking, and catalytic hydro treating, each of which had daily production capacity of 342,000, 80,000, 43,000, 54,600, 204,500, and 588,800 barrels, respectively. Additionally, Kuwait produced 47,800 barrels of gasoline per day, 189,700 barrels of kerosene, 226,100 barrels of distillates, and 185,300 barrels of residuals. Growth in gasoline and residuals production was particularly impressive, with each category growing 30% and 23.6%, respectively. With the exception of gasoline, of which the country demanded 71,100bpd, Kuwait produced more downstream petroleum products in every category than it consumed.
Between 2014 and 2015, Kuwait added 13 new oil rigs to its energy infrastructure, bringing its total to 58. Additionally, Kuwait completed 622 new wells in that period, besting its 2014 new well completion numbers by 26. Among the members of OPEC, only Venezuela completed more, with 636. There are 1,731 producing wells in the country, comprising almost 4% of the total wells in OPEC. Of Kuwa
it’s daily crude oil production of 1.9 million bpd, more than 77% of it is destined for Asia, while almost 14% is exported to North America, 5.3% goes to Europe, and almost 3% goes to Africa. Refined petroleum products are exported to three major markets, with Asia Pacific, Europe, and North America receiving 59.5%, 39.5%, and 1%, respectively. Kuwait has a fleet of four LPG carriers with a combined capacity of 215,000cbm. Additionally, Kuwait has 13 crude oil pipelines stretching across 357 miles, each of which is owned and operated by the Kuwait Oil Company, a subsidiary of the government owned Kuwait National Petroleum Corporation (KNPC). There are also six petroleum product pipelines stretching across 125 miles, each owned and operated by KNPC
Though not as extensive as its oil reserves, Kuwait’s natural gas reserves are large, totaling nearly 1.8 trillion cbm and accounting for 1% of the world’s total proven reserves. In 2015, Kuwait produced nearly 15bcm of natural gas, a slight dip on last year’s figures. Consumption, however, has seen a sizable uptick in recent years, and with annual use approaching 19.4 billion cubic meters Kuwait has become a net importer of gas.
Though depressed oil prices have hit some firms rather hard, others see the slow price growth as an opportunity for different aspects of the industry to develop and evolve. In an exclusive interview with TBY, Waleed Abdullah Al-Houti, Group Chairman of Al Dorra Petroleum Services (ADPS), discussed how pricing pressure can lead to unexpected opportunities. “There are positives and negatives,” said Al-Houti. “When oil prices shrink, the private sector shrinks, but things are different on the government side. In the coming three years, around USD5 billion in projects and contracts are expected in the oil sector. So, on the government side, there is a lot of activity, expansion, and investment going on for the coming three years as part of the government’s five-year development plan.”
With no nuclear energy, coal, or hydroelectricity to speak of, oil and natural gas are the country’s major sources of electrical energy generation, and almost 71% of all electricity is produced in liquid fuel generators. In recent years, however, renewable energy, namely solar, has begun to make more and more of an impact. Though the country’s renewable infrastructure is still small, a serious long-term commitment has been made by officials and real potential exists. In its Vision 2030 plan, Kuwait announced its intention to increase renewable energy generation to an impressive 15% of its overall power generation.
The electricity infrastructure in Kuwait is managed by the Ministry of Electricity and Water (MEW), and there is currently almost 16GW of installed capacity, though the country plans to increase its capacity to 28GW by 2030 and almost 24GW by 2020, according to the International Atomic Energy Association (IAEA). MEW relies almost exclusively on its oil and gas resources to power both its electricity generation facilities and its potable water production, but the country’s vision for its energy future includes relatively large diversification, particularly toward renewables, by 2030.
According to the market research firm Marmore, per capita energy consumption is expected to reach 20,000kWh by 2020. In order to fulfill growth in demand, analysts expect that almost USD23 billion in grid and infrastructure investment will be required, creating sizable opportunities for regional and international firms specializing in grid expansion. According to the Arab Times, MEW expects to procure 4,500MW of power on its own, while 8,400MW will be procured through joint ventures with private firms.
Between 2014 and 2015, Kuwait’s renewable energy consumption increased by an impressive 36.9%, according to BP, though total consumption is less than 50,000 tons of oil equivalent.
As Kuwait continues to move toward its ambitious 2030 energy goals, renewable and alternative forms of energy will become increasingly important. In an interview with TBY, Abdullah A. Al Mutari, CEO of EnterTech Holding Company, explained the importance of green and renewable energy for Kuwait’s future. “If Kuwait does not adopt energy-efficient policies and renewables, climate change will have a drastic impact. Kuwait’s temperature is reaching record highs and the highest temperature in the world was recorded in Kuwait in July 2016,” said Al Mutari. “The temperature cannot be 60 degrees outside and 16 degrees inside homes,” he concluded.
Moving forward, Kuwait faces the challenge of long-term low oil prices and a distribution matrix that is in dire need of diversification. While it remains to be seen how OPEC production cuts will impact prices over 2017, Kuwait is determined to continue growing and expanding its oil sector, a realistic approach to longer-term desire to move beyond the black stuff. And while the private sector may be stunted, the government is ready to mobilize its own fiscal strength to make sure Kuwait remains one of the world’s largest hydrocarbon powers in the years to come.
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