Kuwait to outsource huge redevelopment job

Nov. 29, 1999
Kuwait plans to double oil production in its northern fields by outsourcing a $7 billion package of redevelopment and enhanced oil recovery work to an international consortium of petroleum companies.

Kuwait plans to double oil production in its northern fields by outsourcing a $7 billion package of redevelopment and enhanced oil recovery work to an international consortium of petroleum companies.

At an international conference on investment by foreign companies in oil field development in Kuwait last week, Kuwaiti Oil Minister Sheikh Saud Nasser al-Sabah highlighted the strategic importance of further developing the country's northern oil fields as part of an overall quest to boost its production capacity to more than 3 million b/d. Kuwait currently has productive capacity of 2.5 million b/d and a quota, under its membership in the Organization of Petroleum Exporting Countries, of 1.84 million b/d.

He noted Kuwait plans to increase the production capacity of five of its northern fields to 900,000 b/d by 2005 from the current level of 450,000 b/d. Those five fields hold an estimated 16 billion bbl of oil reserves.

Al-Sabah said the plan to develop the fields would soon be presented to international oil companies. At least 220 representatives of international oil companies, investment bankers, and specialist consulting firms attended the conference. Also among attendees were A* I. al-Naimi, Saudi Arabia's minister of petroleum and mineral resources, and Al

The proposal was met with some controversy in Kuwait's parliament, where concerns were expressed that the project might lead to foreign oil companies taking over ownership of Kuwait's vast oil reserves.

But Al-Sabah insisted, ''The countdown for executing this project has started. Many countries, including Arab states in the [Persian] Gulf, beat us to this. We are behind, and it is time we press ahead with this project."

KPC view

Nader Sultan, vice-chairman of Ku- wait Petroleum Corp., in explaining the development plan, noted that the five producing northern fields currently account for a fourth of Kuwait's total production.

"Only one operating service agreement, covering all northern fields, will be awarded to a multinational consortium of international companies," he said. Sultan noted that the award would be based on a competitive bidding process, incorporating technical and financial criteria. Kuwait has set up a data room for the prospective bidders at Kuwait City.

Sultan pointed out that Kuwait is not capable of increasing its production capacity to 3 million b/d early in the next millennium without the technical assistance of international oil companies.

When KPC agreed to invite international oil firms to its oil sector, it set two conditions: first, that the companies develop only proven oil reserves and not explore for new deposits; and, second, that the role of foreign firms would be to extend services or to work as contractors, not producers. In addition, the foreign companies would finance the development process, Sultan said.

He said Kuwait would issue requests for proposals after allowing oil companies that had prequalified to have access to technical data on the fields.

Foreign firms operating in Kuwait, which hold about 10% of the world's crude oil reserves, are currently restricted to technical service agreements.