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Page added on May 12, 2016
Kuwait Plans To Ramp Up Oil Production By 44% Before 2020
A senior Kuwait Petroleum Corp official has confirmed to media the company’s plans to increase production by 44 percent to almost 4 million barrels a day in 2020. The plan is a continuation of current attempts to pump as much crude as possible and tender new E&P projects in the Persian Gulf. In addition, Kuwait Petroleum Corp plans to ramp up local refining capacities.
Kuwaiti crude is currently trading at around $40 a barrel, a palpable discount to international benchmark Brent. However, Kuwait boasts low-cost production, but according to a local energy analyst, $40 is below the breakeven level, and significantly so. Kamal Al-Harami has slammed the government for failing to come up with a contingency plan in case prices stay at current levels, and for doing nothing to prop them up—not that there’s a lot Kuwait could do on its own, even though it is among the top 10 global oil producers.
Yet the criticism may not be completely deserved. April saw oil workers in Kuwait go on strike for three days, cutting production to as low as 1.1 million barrels per day, down from 3 million, in protest to planned reforms that would see higher prices for utilities and food, and a possible salary freeze for the public sector. These price increases, Al-Harami notes, will only affect expats, so they are more of a half measure. Yet, freezing the salaries of public servants would lead to substantial savings.
According to OPEC data, Kuwait exports most of its oil: an average of 2 million barrels per day in 2015. This April, a quarter of this went to China, a 30 percent increase on the year. Kuwait is also eyeing energy supply projects in South Korea. At home, Kuwait Petroleum Corp. is preparing for its first offshore projects. The message seems clear: we won’t surrender market share, whatever the price.
This message is in tune with the strategy used by OPEC’s biggest producer, Saudi Arabia, yet it was easier for Saudi Arabia to enforce new, higher prices for common goods. Kuwait has faced serious opposition because of the greater degree of human rights and freedoms, including the effective existence of trade unions. Freedoms or no freedoms, when push comes to shove and the budget deficit swells beyond manageable levels, Kuwait will have to take steps to rein in expenses. Or so one would think.
In April, when the news about the coming tenders for offshore projects came out, Kuwait Petroleum Corp.’s chief executive Jamal Jaafar said he expected the oil market to return to normal in the second half of 2016. This, however, will be a new normal, as a number of analysts have warned—a new normal of about $50 a barrel for the short term, based on the last-day price of Brent futures for December 2016 in CME Group’s system. It’s as good a forecast as any other, as nobody really knows what could happen to oil even in the next two months.
According to Al-Harami, the breakeven price for Kuwaiti crude is in the $60-$70 range. Even if the analyst is, consciously or not, painting the picture grimmer than it is, the current price level is not doing Kuwait any favors. What’s more, there is no certainty whatsoever that Brent will reach $47 by the end of the year and stay there, especially as supply grows.
What’s perhaps worse is that the longer Kuwait waits for prices to improve, meanwhile raising production, the harder it will be to effect meaningful reforms and the fewer resources it will have to do this.
By Irina Slav for Oilprice.com
23 Comments on "Kuwait Plans To Ramp Up Oil Production By 44% Before 2020"
PracticalMaina on Thu, 12th May 2016 8:40 am
http://gulfnews.com/news/europe/switzerland/80-per-cent-of-world-s-city-dwellers-breathing-bad-air-un-1.1826187
YAY! In other news, Kuwait plans to make it so its citizens spontaneously com-bust when outside!
String900 on Thu, 12th May 2016 9:01 am
This only makes sense if they see Solar Dominant in 12 years.
forbin on Thu, 12th May 2016 9:02 am
ok so
” plans to increase production by 44 percent to almost 4 million barrels a day in 2020″
and
” Kuwait boasts low-cost production ….$40 is below the breakeven level, ”
and that brake even level is
” the breakeven price for Kuwaiti crude is in the $60-$70 range.”
hmm, not that low cost then , in fact high cost ?
given time maybe $100 will be ” low cost ” !
Forbin
GregT on Thu, 12th May 2016 9:51 am
Kuwait Plans To Ramp Up Oil Production By 44% Before 2020
And the world needs to cut the burning of fossil fuels by some 85% by 2035, if we have any hope of stopping a catastrophic runaway greenhouse event.
Hmmm, Houston, we have a problem…………..
shortonoil on Thu, 12th May 2016 10:32 am
” the breakeven price for Kuwaiti crude is in the $60-$70 range.”
Quite believable, since in 2012, the average world wide producer cost was in the $90. Most of the cost estimates that you read are EBITDA, or cash flow estimates, not profit and loss estimates. EBITDA is the measure that banks use to determine loan eligibility. It merely determines if a loan applicant has enough cash flow to cover the payments. Producers don’t pay the full cost of production to begin with. They don’t pay for the roads that they use, military protection, harbors, worker education, environmental damage, judicial services, legislative services, regulation costs, and hundred of other services that are needed to produce oil. Those additional costs are borne by the society that uses the oil.
The average world producer is now losing money producing oil. They are existing by extracting and turning their primary asset into a positive cash flow, That is, their reserves, and they are doing it by not replacing them. The world’s producers net worth is now declining by an amount that is approximately equal to their gross sales. That is now about $1.6 trillion per year.
This is all about the final phase of the oil age; it ends when producers go broke and can no longer produce oil. Just don’t expect the oil companies, or MSM to tell you that. It would be bad for business! If possible no information is allowed to the public that could be bad for business. It you don’t know that you have been living under a rock.
http://www.thehillsgroup.org/
Boat on Thu, 12th May 2016 11:37 am
If you set up an key word key word search for “new oil finds” you would know Kuwait recently made new discoveries in new fields prompting the expected surge in production.
shortonoil on Thu, 12th May 2016 1:26 pm
Kuwait says they have found a new oil field and gas field. Of course, they know nothing about it?
“The statement gave no estimate on the size of the field, and a company spokesman did not immediately respond to a request for comment.”
http://www.foxnews.com/world/2016/03/24/kuwait-oil-company-says-it-found-new-oil-and-gas-field.html
Fox news, impressive!
After half the petroleum geologists in the world have gone over that piece of desert for a hundred years, they find a new field? Well, well!
Apneaman on Thu, 12th May 2016 1:39 pm
Boat, did you just get the internet recently? New to computers and want to share some your just discovered search tips and tricks? Some of us have been online from the very first day residential internet service was available in our respective locals and some probably had access even before that at work/school. I still have a bag of dial up tips and tricks and can help you with your AltaVista navigating and searches if you like.
Anything for you boater.
https://www.youtube.com/watch?v=gsNaR6FRuO0
Apneaman on Thu, 12th May 2016 1:53 pm
Boat, remember the interwebs olden days when we had to use barbaric P2P networks like Gnutella to download our free porn? Man that was brutal – like waiting for your hot girl friend to come home from work so you could relieve yourself. Not like today where I can instantly stream an entire harem of nubile 18 year old hotties to my brain 24/7.
You were right after all boat. Technology really has made my life so much better.
Pro tip – don’t get any lube on your mouse or keyboard boat. Big trouble.
Apneaman on Thu, 12th May 2016 2:39 pm
Another gift bequeathed to the America’s babies and kids from the Lords of cancer.
Fracking’s Air Pollution Puts Infants and Children at Risk of Developing Heart, Lung Problems: New Study
“A newly published peer-reviewed study concludes that air pollution from fracking puts people’s lungs, hearts, and immune systems at risk – and that the health risk are particularly pointed for young children and infants.
The study – the first to specifically focus on how shale oil and gas drilling affects children ability to breathe – concludes that starting in the womb, children’s developing respiratory systems are particularly at risk from five airborne pollutants associated with fracking and drilling.
“We conclude that exposure to ozone, [particulate matter], silica dust, benzene, and formaldehyde is linked to adverse respiratory health effects, particularly in infants and children,” the researchers wrote in the study, titled “Potential Hazards of Air Pollutant Emissions from Unconventional Oil and Natural Gas Operations on the Respiratory Health of Children and Infants” and published in Reviews on Environmental Health.
“While the rapid growth of this industry was undertaken without substantial public health research, there are now numerous publications clarifying health risks and, increasingly, health outcomes,” they wrote, adding that since 2013, over 560 peer-reviewed studies on unconventional oil and gas extraction’s impacts have been published, representing over 80 percent of the scientific literature on the topic. In other words, in the last few years, the risks from fracking have become much more heavily studied – and the results show good reason to be concerned about how people’s health is being affected.”
http://www.desmogblog.com/2016/05/12/air-pollution-fracking-puts-infants-and-children-risk-developing-heart-lung-conditions-new-study
Boat on Thu, 12th May 2016 3:16 pm
short,
http://gulfbusiness.com/kuwait-says-finds-four-new-promising-oilfields-kuna/#.VzTkRIQrLZ4
Boat on Thu, 12th May 2016 3:29 pm
ape,
Boat, did you just get the internet recently? New to computers and want to share some your just discovered search tips and tricks?
Then why don’t you use those great skills to prove reality instead of false doom. My example of oil find information is reliable available.
shortonoil on Thu, 12th May 2016 3:41 pm
“The grades found in the fields were both light and heavy oil, with preliminary results showing “huge commercial volumes”, KUNA said.”
http://gulfbusiness.com/kuwait-says-finds-four-new-promising-oilfields-kuna/#.VzUQz0_pWPZ
Another article that tells us absolutely nothing! What is “huge”, a 100 million, 500, one GB? How much heavy and how much light. What is its sulfur content, or vanadium. There is a guy on this side of Brooklyn that sells “huge freshly painted bridges!
Is this like the huge discovery of all that shale oil, that can’t make money – unless you are selling shale stock and leases, of course?
Apneaman on Thu, 12th May 2016 3:47 pm
Boat what false doom is that? Your referring to peak oil right? or the economy? Pay attention boat. I don’t make specific predictions on those – just provide evidence showing the trend.
AGW, 6th mass extinction and all human overshoot issues on the other hand… Well in that case I have no qualms predicting the species is going bye bye. That is simply a matter of physics, chemistry and biologly and the history of this planet. All of which are beyond you level of knowledge and understanding. You could learn, but I don’t think you want to. Much safer to play the minimizer card which is about as open minded as most can be in your neck of the woods. Fuck, they are doing the same thing in Alberta and all over Canada too for that matter. The humans have committed suicide. It’s like a slow poison.
Boat on Thu, 12th May 2016 3:54 pm
short,
A sensible approach would be to wait for more information. Fields take years to decades to develop. Just like unconventional oil. It will take decades for the story to unfold.
GregT on Thu, 12th May 2016 5:17 pm
@ Boat,
“If you set up an key word key word search for “new oil finds” you would know Kuwait recently made new discoveries in new fields prompting the expected surge in production.”
“A sensible approach would be to wait for more information. Fields take years to decades to develop.”
So which one is it Boat? Make up your mind.
antaris on Thu, 12th May 2016 5:37 pm
Ha ha ha ha.
Good one Greg.
Apneaman on Thu, 12th May 2016 5:56 pm
Boat, here is what I was talking about earlier – evidence that shows the trend that everything is not awesome. Connect the dots with all the other evidence and decide for yourself where it’s going.
America’s Shrinking Middle Class: A Close Look at Changes Within Metropolitan Areas
http://www.pewsocialtrends.org/2016/05/11/americas-shrinking-middle-class-a-close-look-at-changes-within-metropolitan-areas/
Survivalist on Thu, 12th May 2016 6:12 pm
All new discoveries aside this production increase is a result of infill drilling. The production plateau will be held at the expense of future production, meaning an eventual decline that will be necessarily steeper. As well the fact that KSA is going offshore for heavier oil that contains vanadium is a rough indication that they have no further prospects onshore, other than more infill drilling. I don’t know when the shit will hit the fan but I know it will and it will likely be in the next decade. I have not fully discounted the idea that I will die in a famine. By way of transportation, fertilizer, machinery and pumping water the modern industrial agricultural system turns hydrocarbons into carbohydrates. I anticipate a future that includes more root veg in the winter if you live in a northern climate and less 3000 mile caesar salads.
Survivalist on Thu, 12th May 2016 6:42 pm
OPEC MOMR is out tomorrow/Friday 13 of May. It’ll be interesting to see the secondary sources report on OPEC production. Kuwait no doubt takes a hit due to the labor strike they had. Iran will be up. Iraq is a mystery as usual. My hunch is Saudi Arabia is pumping flat out for all their worth. They could probably increase production of the heavy stuff with the vanadium in it but nobody is buying that except for their own domestic refineries. I suspect domestic refining of the heavy vanadium laced oil is at max. Just a hunch. It’ll be getting hot there soon so unless they increase production to match increased consumption their exports will decline for a few months this summer.
This article is from last year but this year will likely be similar.
http://www.wsj.com/articles/as-saudis-keep-pumping-thirst-for-domestic-oil-swells-1435786552
shortonoil on Thu, 12th May 2016 7:19 pm
“As well the fact that KSA is going offshore for heavier oil that contains vanadium is a rough indication that they have no further prospects onshore, other than more infill drilling.”
From the water cut in Ghawar, as reported by Saudi petroleum engineers, it is a fairly simple calculation to determine the oil seam remaining. Of Ghawar’s original 350 foot seam less than 30 feet of it remain. Ghawar is now well over 90% depleted, and when the water hits the horizontal perforations of those producers it all ends very rapidly. As Matt Simmons said, “as Ghawar goes, so goes the world”.
Rob on Thu, 12th May 2016 9:25 pm
It was 104F in Riyadh today so i’m sure the AC across SA are buzzing away. We aren’t going to need oil in 10 years because we’ll all be driving Teslas and charging up with our solar arrays…working 10 hrs a week because robots do everything for us.
makati1 on Thu, 12th May 2016 9:54 pm
Nice sarcasm, Rob. ^_^