OBG talks to Farouq Al Zanki, Former CEO, Kuwait Petroleum Corporation (KPC)

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Farouq Al Zanki, Former CEO, Kuwait Petroleum Corporation (KPC)

Interview: Farouq Al Zanki

How can Kuwait improve the marketability of its petroleum products given increased competition from other countries in the region?

FAROUQ AL ZANKI: We are not overly concerned about competition in the crude oil market as we have our own long-standing clients and a well-known accepted crude quality that has established a mark in the industry. Now and in the foreseeable future, prospects are promising. Our focus at present is to further develop relationships with long-term buyers. We are also working to better tailor our products to meet future demand patterns. As such, we are constructing new refineries and implementing clean fuel projects, which will upgrade existing refineries. So, looking forward, we will have high-quality products, like sulphur-free gas oil, and we expect to find markets for these easily, meeting future requirements of the market. These projects are moving ahead and will soon complement Kuwait’s offerings to the international market.

What is the role of gas in Kuwait’s energy mix in meeting growing domestic demand, and what is the best strategy for accessing supply?

AL ZANKI: Power consumption and demand are high today, and as the population grows, demand will increase. This will, of course, put a lot of pressure on the oil sector to release gas for power production. Today we are using crude, but hopefully in the future we will be able to use more gas. This is a big challenge for us given the scarcity of local gas, but with new discoveries in Jurassic gas and the help of Shell, we will be able to produce additional free gas.

Even with this optimistic look in local extraction, we will still need to import liquefied natural gas. Hopefully, developments offshore and in the neutral zone will avail more gas in the near future.

If you combine all these sources of natural gas, we will eventually have enough gas to meet the electricity requirement, increasing our export capacity of crude and other liquids. Our aim is to develop local gas by increasing productivity of offshore gas as well as exploring the possibility of extracting the deep gas, which is there, but is so deep that we must study the feasibility of extracting it.

Short of production sharing agreements, what regulatory changes can be made to make Kuwait more attractive for international oil companies (IOCs)?

AL ZANKI: We have developed a model specifically to suit our requirement and work within the confines of the Kuwait constitution. It is based on enhanced technical service agreements, which are acceptable to the IOCs and are the reason Shell, Chevron and BP are present in Kuwait today. Recently we signed a technical service agreement with Shell to assist with gas development, a memorandum of understanding with France’s Total for joint refining and a joint venture agreement for a petrochemicals complex with China’s Sinopec. This ensures the framework for partnerships.

These arrangements have been working well, and there is mutual benefit. Kuwait cannot meet its strategic objectives without external help. We are building up our national capacity, but this requires time and effort. Going from 3m to 4m barrels per day is not easy – not only because of the numbers, but also because we are now targeting difficult oil.

How will increasing Kuwait’s value-added petroleum production benefit the country in the long run?

AL ZANKI: Since petroleum isa huge source of income for Kuwait, adding to its value, such as with clean energy products, will boost the national economy. If we do not upgrade, marketing low-quality products will pose a challenge to KPC in an environment that favours clean products. Today the market accepts high-sulphur diesel, but changing environmental requirements will eventually make our current products hard to sell. If we do not complete the upgrading projects on time and increase our capacity to provide the low-sulphur products, protecting KPC’s market share will be hard.


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The Report: Kuwait 2013

Energy chapter from The Report: Kuwait 2013

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