Energy Crisis

Image credit: Shutterstock / i am adventure

The entry into the 2020s began with the disruption caused by the COVID-19 pandemic as a strong global tipping point to accelerate the transformation of the energy matrix toward a green and clean system; however, the world’s immediate energy consumption remains dependent on the oil and gas sector, a pillar in which Gulf countries, such as Kuwait, play a key role with investments to increase their production efficiency and production capacities.

One example is the Duqm (Oman) refinery project, an innovative facility developed by a joint venture of Oman Oil Company and Kuwait Petroleum International that is scheduled to come online in 2023.

These downstream facilities, which show the potential for regional partnerships, require substantial investments that serve to keep the heart of the global economy running in the long term, as fossil fuel consumption is expected to account for 78% of the global energy matrix by 2032, up from 81% in 2022, according to estimates by the Economist Intelligence Unit. Countries are developing a multitude of decarbonization projects and many oil companies expect to be net zero by 2050.

But the energy transformation is moving slowly, so Kuwait is preparing to keep up with the world’s need for fossil fuels with facilities such as Duqm and the commissioning of the Al-Zour refinery complex, which is expected to start operations soon.

The main processing units of the Al-Zour complex, involving an investment of USD16 billion, are being developed by a consortium between Tecnicas Reunidas, Sinopec Engineering and Hanwa Engineering & Construction. Once operational, the facility will be able to process 615,000bpd of Kuwait light crude or 535,000bpd of blended heavy crude.

Some of the objectives that the country seeks with this refinery is to produce high quality fuels for the international market and, in that respect, it is a Kuwait-China cooperation project that is part of the Belt and Road Initiative.

This Chinese initiative, in which there is a huge investment in approximately 150 countries, seeks to create a global infrastructure network that serves to improve world logistical connectivity.

“Kuwait’s oil and gas business has significantly accelerated recently. In comparison to the past few years, the change is extreme. Production is up, and the increase in work across the sector has allowed us, and external investors, to significant increase their participation,” said Robin Bose, CEO at Petrogulf Gulf Petroleum Investment, which offers equipment and assets to companies involved in the oil and gas sector.

Bose, who foresees an important development for the Kuwaiti hydrocarbons industry, believes that the development of large oil projects offers a great opportunity for local companies, as they are not big enough to take on projects. In this situation, they are looking for international companies to partner in joint ventures to bid for each project.

While in the hydrocarbons industry there is a large participation of foreign players, in the utilities sector there is still work to be done in that area to bring about the development of a local private industry. In this sector, the slow development of local private utility companies is due to factors such as the low adoption of the PPP framework by foreign investors and the global pandemic, said Paul Frain, CEO of Shamal Az-Zour Al-Oula Power & Water Company. “Shamal is the only independent power and water project (IWPP) in Kuwait. The contract was signed in December 2013, and the expectation was that it would be the start of the bigger privatization rollout, yet nine years later we remain the only IWPP,” he said.

This utility is a good example of how local companies in the energy sector are adapting to production systems based on sustainability. “Our plant primarily runs on fuel gas, and as such we do have emissions; however, our emissions are reduced to the minimum as we adopt the best available technology,” Frain said. As part of its sustainability activities, the company continuously monitors its emissions and conducts studies in collaboration with scientific entities in the country on topics such as the environment or the development of more efficient methods of energy generation or water desalination.

Partnerships to promote sustainable operations is one of the main areas in which Kuwaiti companies have recently entered into collaboration agreements. This is the case of OilServ, which offers services for oilfield operations, which in the last year has concluded several agreements for emissions control and management to improve the environmental performance of its operations.

“We have established a partnership with Questor, a Canadian company, to help us bring emissions to net zero. It is done either by generating electricity or taking care of waste in an alternative way,” said Sara Akbar, CEO of OilServ.

All of these efforts are enabling Kuwait to continue to invest in its important hydrocarbon sector, which will be key to its development and to maintaining the level of product quality needed to sustain the global economy. But it is also expanding the development of projects that enhance the sustainability of economic operations, which, in turn, is creating initiatives that serve as the foundation for a cleaner, greener Kuwaiti economy. Transformation is underway.