Interview: Jamal Jaafar
How will production cuts by the Organisation of the Petroleum Exporting Countries (OPEC) affect KOC’s investment and exploration strategy?
JAMAL JAAFAR: OPEC production cuts have an impact on the immediate production of KOC, as is the case with all the oil companies of OPEC nations, but it is important that these limits do not affect our long-term strategy, our investment or our exploration because they are subject to change. Currently, Kuwait’s production stands at 3.15m barrels per day (bpd), but we are continually working to reach a capacity of 3.65m bpd by 2020. This way once the global oversupply has decreased and production is no longer limited, we are prepared to move forward. This requires continued investment and a focus on efficiency, development of technology and technical know-how, as well as continued exploration.
Among our strategic plans is the expansion of our capacity to produce heavy crude. Kuwait has extensive heavy crude reserves, including the Um Niqa heavy oil production, which has been launched, and is now reaching a production capacity of 5000 bpd of oil. This is in addition to the original plans of reaching 60,000 bpd of Ratqa Lower Fars crude. The Al Zour Refinery which will process our heavy crude, producing the low sulphur oil needed for local power generation, has completed its first phase and is making good progress.
These projects present a number of challenges to the sector though, including the training and development of staff to keep up with technical advancement. Coordination between the many public and private sector parties involved is also a crucial issue. Efforts in the energy sector can offer an example for developing professional skills and efficiencies in the bureaucracy across other areas of the economy.
What role could international oil companies (IOCs) play in your strategic objectives?
JAAFAR: Working with IOCs offers the opportunity to develop know-how and transfer knowledge and advanced technologies to Kuwait. The enhanced version of technical service agreements (ETSAs) play an important part in reaching our targets. IOCs are also helping to achieve the development plan, including providing technical advice to our surface and subsurface plans. The number of drilling rigs currently in use has increased significantly from 2016 and these will create additional opportunities, as will the new oilfields that have been discovered in the north, and the fields in Ratawi, Minagish and Bahra.
To what extent will ETSAs have to be revised, given the high cost and technological work needed to develop the country’s extensive natural gas holdings?
JAAFAR: In the current economic environment, developing a sustainable energy mix is important and can have an outsized impact on the economy by supporting technology, manufacturing and industry. Kuwait has set out to generate 15% of its total energy needs from renewable sources by 2030. Developing Kuwait’s natural gas reserves is also an important part of this strategy. Both of these issues are interconnected, as part of the framework for heavy oil is the application of solar energy to generate steam and power for thermal enhanced oil recovery operations.
A $4.1bn contract was awarded for the engineering, procurement and construction activities of phase I of Lower Fars, forecasted to be commissioned by the end of 2018, and a critical support of successful operations and maintenance through full-field development is being received from another recognised IOC. All of these suggest that the current structure of ETSAs is not inhibiting progress. We are pleased with the way we are moving the sector forward, however, in the future, revision of the current structure of ETSAs could be beneficial for both sides. It is important that any possible changes be carefully considered to ensure the increased transfer of technology and skills to Kuwait, while creating a better business environment for IOCs.
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