Market Report, "Kuwait Oil & Gas Report Q2 2013", published

On the back of enhanced recovery projects and new upstream developments, we expect Kuwait will maintain a steady rise in oil output to reach 3.6mn barrels per day by 2022. While heavy oil and proposed field development projects pose upside risk to our forecasts, political and regulatory uncertainty which has delayed key upstream and downstream projects remains a significant downside risk. Rising consumption will also undercut some gains from increased production of both oil and gas, with an expectation that Kuwait will turn to year-round imports of LNG from 2013 an indication of the tightening supply and demand realities.

We highlight the following trends and developments in Kuwait's oil and gas sector:

* BMI forecasts Kuwaiti oil production to rise from an estimated 2.8mn barrels per day (b/d) in 2012 to 2.9mn b/d in 2013. We believe Kuwait is largely on track to meet oil production benchmarks, yet problematic relations with international oil companies (IOCs) whose expertise will be needed to develop challenging deposits and changes in the global market are risks to watch as the projects advance.
* Northern oilfields, increased recovery of heavy oil, and efforts to maintain production at existing fields will underline the steady gains in output over our 10-year forecast period to 2022. Kuwait is also targeting additional output from new exploration, where volumes are more uncertain. Kuwait has also initiated a study of its shale oil potential and plans to increase development of high-sulphur, highpressure gas reserves to more than triple production capacity by 2030 - a date outside our current forecast period.
* Given the poor quality of Kuwait's non-associated gas reserves, foreign expertise will be especially important as the country seeks to raise domestic production and ease the import burden. Failure of the necessary investment to materialise poses downside risks to our forecasts for gas production, and with oil continuing to supply the majority of feedstock for electricity generation, failure to increase gas production could further undermine volumes available for more lucrative export. Kuwait recently announced it would begin to rely on year-round LNG imports in a sign of rising strain on gas supply and demand balance.
* LNG imports could be supplemented by the re-activation of pipeline imports from Iraq (which have been suspended since 1990); however, even Kuwait Energy, an independent active in Iraq's upstream, acknowledges this is a long-term aim rather than near-term possibility.
* Although Kuwait National Petroleum Company (KNPC) has announced that it will move ahead with the Al-Zour refinery, the long delays further underscore the country's challenging operating environment. Approval of the refinery and the Clean Fuels Project will allow Kuwait to significantly boost both production and exports of refined products, including low-sulphur diesel and Euro-4 gasoline.
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Full Report Details at
- http://www.fastmr.com/prod/589187_kuwait_oil_gas_report_q2_2013.aspx?afid=301

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