FOCUS: Kuwait fails to deal with energy problems

• Date: 01 November 2013
• DOI: http://doi.org/10.1111/oet.12108
• Published date: 01 November 2013

FOCUS

Kuwait fails to deal with energy problems

Kuwait is facing an energy squeeze as it struggles to

increase the production of oil and natural gas. Growing

domestic demand, especially for electricity, has caused

rising volumes of gas imports. Oil exports are also

constrained as a result of the emirate’s repeated failure

to increase its production capacity. A shake-out of senior

management in the national oil company was ordered

earlier this year in order to address some of Kuwait’s

pressing energy problems, but there is little sign so far of

the changes needed to bring the situation under control.

The national parliament meanwhile remains critical of

the way the state oil and gas sector is being run and

the slow pace of development in several major energy

projects.

Rising demand

Kuwait consumes nearly 500,000 bpd of oil, of which

about 350,000 bpd are used to generate electricity

and purify sea water. Total oil consumption has

approximately doubled since 2001 and is set to go on

rising, driven mainly by demand from power stations

and water desalination plants, which are expected to

require between 700,000 and 900,000 bpd by 2030.

Most of the oil burned by the power and water sector

is high sulfur heavy fuel oil, but Kuwait’s refineries do

not produce enough oil to meet domestic demand. As a

result, some power stations have to use crude oil. There

is also an increased use of diesel generators, especially

in the summer when demand for air conditioning is at

its peak.

Plans to make more heavy fuel oil available by raising

the country’s refinery capacity have not been realized

owing to delays in approving a major new refinery

project. Meanwhile, demand for electricity continues

to grow at more than 5% per year, encouraged by

heavily subsidized domestic prices, and the situation is

made worse by the poor efficiency of some of the older

electricity generating stations.

Kuwait’s oil consumption is likely to continue increas-

ing thanks to population growth and urbanization, the

growth of motor car ownership, and rising living stan-

dards, all of which are tied to economic growth related to

the oil industry and the rise in world oil prices. However,

the emirate’s oil industry is also responsible for the cause

of many of the energy problems in Kuwait (Table A).

Production problems

Kuwait produces 3 mn bpd of oil and natural gas liquids

(NGL). Most of it comes from the emirate itself, but

about 260,000 bpd comes from an area to the south

which is shared with Saudi Arabia and is known as

Table A

Kuwait: Oil Profile, 2013

Proven Reserves: 104.0 bn bbl∗

Reserves Remaining: 95.0 years†

(mn bpd)

‡

Production

Crude Oil 2.9

NGL 0.2

Total 3.0

Consumption

Total 0.5

Net Exports

Total 2.5

∗As of 1.1.13

†Based on 2013 production

‡Including half the Neutral Zone

Totals rounded

Source: (Reserves)

Oil & Gas Journal

(Other) Pearl Oil estimate

Table B

Kuwait: Oil Balance, 2013∗

Proven Reserves: 101.5 bn bbl†

Reserves Remaining: 100.0 years‡

(mn bpd)

Production

Crude Oil 2.60

NGL 0.18

Total 2.78

Consumption

Total 0.50

Net Exports

Total 2.28

∗Excluding the Neutral Zone

†As of 1.1.13

‡Based on 2013 production

Totals rounded

Source: (Reserves)

Oil & Gas Journal

(Other) Pearl Oil estimate

the Neutral or Partitioned Zone (see Tables B and C).

Output is currently running close to capacity and the

government wants to increase it, but plans to do so have

been considerably delayed.

To all appearances Kuwait should have little difficulty

in increasing its production capacity. Its proven reserves

are officially stated at 101.5 bn bbl: sufficientfor 100 years

at present rates of production (see Table B). The size of

Kuwait’s reserves, however, is a matter of controversy.

In addition, its largest field-complex is mature and in

increasing need of enhanced oil recovery (EOR).

How many barrels?

The official estimates of Kuwait’s reserves have recently

been called into question both inside and outside the

©2013 John Wiley & Sons Ltd