Kuwait: The Transformation Game

Kuwait's first commercial production of oil began in 1946, some 65 years ago. Up until 1990, its production had been dominated by a few reservoirs. Burgan Al Kabeer Field (Greater Burgan) had the biggest share of the total production reaching 70-80 percent.

At that time, all its production was natural flow, water free and average oil rate per well was significantly high. Reserve to production ratio was exceptionally high. In addition, Capital Investment and Operating Cost during that time were relatively low considering the high incremental production which reached almost 4 million barrels of oil per day (bopd) at one time.

However, such luxury and blessing can't continue forever. Over the past 20 years, and following the Iraqi invasion, Kuwait Petroleum Corporation (KPC) has exerted much effort to re-shape the oil sector to get ready for the future.

As the era of easy oil is drawing to a close, Kuwait seems to be ready for the next phase and have already started to plan for tapping the development of difficult reservoirs as well unconventional resources in the country.

"Talking about the contribution of easy oil is decreasing, and tougher to find and difficult oil is increasing," said Sami Al Rushaid, chairman and managing director, Kuwait Oil Company (KOC).

Kuwait is currently the fourth-largest oil exporter in the world, with its population of 5 million consuming only 10 percent of its oil domestically, and is now pushing at the limit of its production capacity. By 2020, Kuwait hopes to have production capacity of 4 million bopd, and has already announced a series of ambitious projects to make this happen.

"Our investment plans are strong and schedule to deliver this capacity, and most of the growth is coming from primary and secondary recovery schemes in easy to medium complexity reservoirs," said Al Rushaid. "However, it is our strategy to not over exploits our easy oil, we plan to create a more [manageable] transition to the more difficult oil structure," he added.

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Kuwait: The Transformation Game

Kuwait's first commercial production of oil began in 1946, some 65 years ago. Up until 1990, its production had been dominated by a few reservoirs. Burgan Al Kabeer Field (Greater Burgan) had the biggest share of the total production reaching 70-80 percent.

At that time, all its production was natural flow, water free and average oil rate per well was significantly high. Reserve to production ratio was exceptionally high. In addition, Capital Investment and Operating Cost during that time were relatively low considering the high incremental production which reached almost 4 million barrels of oil per day (bopd) at one time.

However, such luxury and blessing can't continue forever. Over the past 20 years, and following the Iraqi invasion, Kuwait Petroleum Corporation (KPC) has exerted much effort to re-shape the oil sector to get ready for the future.

As the era of easy oil is drawing to a close, Kuwait seems to be ready for the next phase and have already started to plan for tapping the development of difficult reservoirs as well unconventional resources in the country.

"Talking about the contribution of easy oil is decreasing, and tougher to find and difficult oil is increasing," said Sami Al Rushaid, chairman and managing director, Kuwait Oil Company (KOC).

Kuwait is currently the fourth-largest oil exporter in the world, with its population of 5 million consuming only 10 percent of its oil domestically, and is now pushing at the limit of its production capacity. By 2020, Kuwait hopes to have production capacity of 4 million bopd, and has already announced a series of ambitious projects to make this happen.

"Our investment plans are strong and schedule to deliver this capacity, and most of the growth is coming from primary and secondary recovery schemes in easy to medium complexity reservoirs," said Al Rushaid. "However, it is our strategy to not over exploits our easy oil, we plan to create a more [manageable] transition to the more difficult oil structure," he added.

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Kuwait Minister: US Shale Oil Bonanza is No Threat

DUBAI - Growing production from U.S. shale deposits is not a threat to Kuwait due to its higher costs, the country's oil minister Hani Hussein said in remarks published late Monday.

"There is no effect on Gulf crudes from shale oil in the United States as it will take a long time for this crude to have an impact because of its high cost," Mr. Hussein said, according to the official Kuwait News Agency, or KUNA.

"Gulf countries have huge reserves that can be produced at simple costs," he added.

Analysts have previously said that producing oil from U.S. shale is estimated to cost around $50-75 a barrel, while in the Gulf production costs are often less than $20.

Earlier this month, Sami al-Rushaid, the chairman and managing director of state-owned Kuwait Oil Co., said that shale production may lead to a fall in crude oil prices as it cuts into demand, but that prices are likely to stay at about $100 a barrel.

Kuwait, an Organization of the Petroleum Exporting Countries member, has previously said it has begun a study to assess its shale-oil deposits.

In November, the International Energy Agency, which represents key oil consumers, predicted the U.S. would overtake Saudi Arabia as the world's largest oil producer by 2020 thanks to shale output, a forecast which the OPEC secretary general said could undermine its members' spending plans.

OPEC said Tuesday that demand for its members' oil in 2013 will be 100,000 barrels a day lower than previously forecast, as growing output from non-member countries, particularly North American shale oil, eats into its market share.

If the scaled-back forecast proves correct, OPEC could be on track to have its lowest share of the global oil market in more than 10 years. OPEC's move comes as industry experts question whether the producers' group, which has had a decisive influence on the oil market since the 1970s, can maintain its position amid a boom in U.S. oil production resulting from shale-rock drilling technology.

Copyright (c) 2012 Dow Jones & Company, Inc.

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