Kuwait Oil and Gas Report Q2 2012

BMI View: One of OPEC’s key oil producers, Kuwait’s rise in output will be relatively slow and steady. We see Kuwait producing around 3.5mn b/d by 2021, although a substantial rise in oil consumption will reduce oil available for the export market. We see a faster increase in gas production in the second half of our forecast period, with output crossing 16bcm by 2021. Kuwait will continue to remain a net gas importer and refined products exporter.

We highlight these trends and developments in Kuwait’s oil and gas sector:

BMI sees Kuwaiti oil production rising from an estimated 2.5mn b/d in 2011 to 3mn b/d by 2017 and then to 3.5mn b/d by 2021.

The advance of Project Kuwait, an ambitious scheme to enable IOC upstream investment, is critical to boosting oil production given the mature nature of the giant Burgan field.

Regulatory approval of the long-delayed al-Zour refinery and the Clean Fuels Project will allow Kuwait to significantly boost both production and exports of refined products, including lowsulphur diesel and Euro-4 gasoline.

Significant non-associated gas in the Jurassic fields in Kuwait’s north must be monetised in order to lessen dependence on gas imports, which we see continuing through to 2021. LNG imports could be supplemented by the re-activation of pipeline imports from Iraq (suspended since 1990).

We expect Kuwaiti gas production to rise from an estimated 12.3bcm in 2011 to over 16bcm by 2021, with imports rising to around 7.4bcm by the end of our forecast period. Kuwait’s dependence on oil prices leads to high volatility in the country’s export revenues. Our assumptions of a slower growth in China, a faltering recovery in the US and a worsening eurozone debt crisis, clearly pose a threat to global oil demand. We assume OPEC Basket oil prices to fall from US$111.47 per barrel (bbl) in 2012 to US$107.00/bbl in 2013, thus creating a downside risk for the Kuwait’s macroeconomic outlook.