SHEIKH AHMAD FAHAD AL AHMAD AL SABAH, Minister of Energy, Chairman of KPC and President of OPEC

FOURTEEN years ago the infrastructure of Kuwait’s key economic sector was all but destroyed by the Iraqi army, which left the country under a pall of black smoke from burning oil wells as it was driven out by U.S.-led coalition forces.

Today, the emirate is back among the world’s leading oil producers, and planning to increase its current output of 2.8 million barrels per day (bpd)) to 4 billion bpd by 2020.
That the industry was restored so quickly is a tribute to the work of the Kuwait Petroleum Cor-poration (KPC), the body responsible for the production, refining, and transportation of Kuwait’s oil.

State-owned but commercially oriented, KPC was established in 1980 to unify Kuwait’s diverse oil sector under a single corporate umbrella. Now the corporation is set to play a key role in a multi-billion-dollar investment plan to rehabilitate and modernize the sector’s infrastructure.

According to Minister of Energy, Chairman of KPC and President of OPEC Sheikh Ahmad Fahad Al Ahmad Al Sabah, Kuwait plans to invest around $10 billion over the next four years as part of its long-term strategy to boost output and export capacities. Over the next 20 years, investment in the oil industry will rise to $55 billion.

Central to the government’s plans is Project Kuwait, which aims to almost double the oil producing capacity of the northern oil fields to 900,000 bpd.

Approximately two-thirds of Kuw-ait’s oil production comes from the southeastern on-shore Greater Burgan field. Investment in Project Kuwait will be focused on the oil fields of Rawdatain, Abdali, Sabriya, and Ratqa to the north, which currently produce around a fifth of the total.

The project depends on massive investment by international oil companies in the advanced technology required to develop the fields. The cost is estimated at $8.5 billion.

It would be the first time that major foreign investment has been allowed in Kuwait’s oil sector since the industry was nationalized in the 1970s. However, the authorities are at pains to stress that ownership of the oil would remain with the state, in accordance with Kuwait’s constitution.

HANI HUSSAIN Deputy Chairman and CEO of KPC

“Basically, we have four major oil fields where there would be an operating service agreement with an international oil consortium,” explains Hani Hussain, KPC’s Deputy Chairman and Chief Executive Officer. “Through an operating service agreement, they would be entitled to certain profits that will be linked to the operation and will be enhanced as performance improves.”

The likely returns to the foreign companies involved in the project have been estimated at around $3.2 billion. ChevronTexaco, ExxonMobil, and BP are leading consortia competing for the contract.

The project passed the first hurdle in June when a parliamentary committee unanimously approved a draft law to seek the help of foreign companies. Kuwait's parliament is due to debate the project in October.

Mr. Hussain says the next 25 years will provide both challenges and opportunities, but he remains confident of a continued bright future for the petroleum sector.

KPC operates through five major subsidiaries: the Kuwait Oil Company (KOC), which is responsible for oil and gas production; the Kuwait National Petroleum Company (KNPC), which controls refining, gas processing, and product marketing; the Kuwait Oil Tanker Company (KOTC), which transports crude oil and liquefied petroleum gas (LPG); the Petro-chemicals Industries Com-pany (PIC), which manages domestic petrochemical and fertiliser production; and the Kuwait Foreign Petroleum Exploration Company (KUFPEC), which undertakes exploration activities abroad.

The Supreme Petroleum Council, the highest energy authority in Kuwait, has recommended that KPC privatizes some of its non-core businesses, and both KOTC and KUFPEC are to be sold.

Mr. Hussain stresses the importance of private sector participation in future oil sector projects. “The privatization process will encompass a lot of segments in the oil sector, and in some cases American participation would come in collaboration with the Kuwaiti private sector. So there are great opportunities.” He makes the point that, on both the management and technical side, there is already a large American participation in Kuwait’s oil industry, even in sectors that are largely government owned.

“We utilize a lot of U.S. technology, particularly when building our refineries and petrochemical plants,” says Mr. Hussain. “Most of the sophisticated processes that we use are ones that are licensed by American companies.”