The energy sector is the backbone of Kuwait’s economy, accounting for roughly 90% of both exports and government revenue. Ambitious mega-projects led by state-owned companies responsible for the extraction, processing and marketing of oil and gas also drive the non-oil economy by supporting tens of thousands of jobs in engineering, construction and support services. Despite the sharp fall in oil prices starting in 2014, progress on these projects and investment in new technology across the energy and utility sectors continues. With self-imposed production cuts involving major oil-exporting countries coming to an end, the strategic intent is to transform Kuwait from a country that primarily pumps and exports crude oil, to one with an integrated energy industry. Sector goals include optimising oil extraction, realising the full potential of domestic natural gas fields and doubling refining capacity to produce cleaner fuels and increased volumes of feedstock for a more diversified downstream sector.

High Use, High Potential

Kuwait is one of the world’s highest per capita consumers of primary energy, with each of its 4.1m residents consuming 9.6 tonnes in 2017, or 39.3m tonnes in total, according to BP’s “Statistical Review of World Energy 2018”. The country has proven oil reserves of 101.5bn barrels, or 14bn tonnes, representing around 6% of the global total. This is also the second-highest figure for any GCC country after Saudi Arabia, which was estimated to have 266.2bn barrels, or 36.6bn tonnes. To compare, regional neighbours Iran and Iraq have reserves of 157.2bn and 148.8bn barrels, respectively. In 2017 Kuwait produced 3.03m barrels per day (bpd), a 3.8% drop on the year before, but in-line with production figures for the previous five years, which averaged out to approximately 3.1m bpd.


The first concession agreement for oil drilling was signed in 1934 with the Kuwait Oil Company (KOC), a joint venture formed by the Gulf Oil Company, now known as Chevron, and the Anglo-Persian Oil Company, now known as BP. The newly formed firm made its first significant discovery in the Burgan field in February 1938.

Preliminary oil exports came in 1946, and by 1972 the privately owned KOC had reached output of 3.27m bpd, with production reaching as much as 3.7m bpd some days – the highest rate in the country’s history. That same year saw the government acquire a 25% stake in the company, with this share gradually increasing over the next three years until it had fully nationalised KOC in December 1975.


Prior to the nationalisation of KOC, the government formed the Supreme Petroleum Council in 1974 to devise policy, while the Ministry of Oil was tasked with overseeing the sector as a whole. The council remains one of the highest-ranking bodies in the industry today. With KOC in government ownership, the Kuwait National Petroleum Company (KNPC), which managed downstream refining and marketing, and the Petrochemical Industries Company were also nationalised in 1975 and 1976, respectively.

Onshore oil production in the Partitioned Neutral Zone (PNZ) between Kuwait and Saudi Arabia as well as the Mina Abdullah Oil refinery were developed by the American Independent Oil Company, which was nationalised in 1977 along with the Kuwait Oil Tanker Company (KOTC) in 1979.

Unlike some of its GCC neighbours, Kuwait’s constitution does not allow foreign firms to own concessions in oil and gas, with the country preferring instead to work with international oil companies through service contracts. However, the prohibition on foreign companies owning concessions does not mean international oil firms are not involved in Kuwait’s energy sector. BP, Royal Dutch Shell and Chevron continue to play an influential role in the industry through service contracts and agreements.

K Companies

In 1980 the Kuwait Petroleum Corporation (KPC) was formed as the umbrella business for all nationalised assets in the country’s oil industry. Government-controlled businesses, collectively referred to as the “K Companies”, remain in charge of the sector to this day with KOC, KNPC and KOTC responsible for upstream, downstream and shipping, respectively, while the Petrochemicals Industries Company explores opportunities in the petrochemical sector. On May 1, 2017 the Kuwait Integrated Petroleum Industries Company (KIPIC) was launched as a subsidiary of KPC to lead integrated refining, petrochemicals and liquefied natural gas (LNG) imports at the Al Zour complex, one of the energy sector’s key development projects, located some 40 km to the south of Kuwait City.

Kuwait Gulf Oil Company, in coordination with Saudi Arab Chevron and Aramco Gulf Oil Company, is responsible for the country’s share of oil and gas exploration, development and production in the PNZ through the onshore Wafra Joint Operations (WJO) and the offshore Khafji Joint Operations (KJO). The natural resources in the PNZ are shared equally by both countries; however, a protracted dispute with partner Saudi Arabia has resulted in both fields standing idle for several years, with production ceasing at KJO in October 2014 and at WJO in May 2015. Prior to this, the PNZ’s two fields were producing around 500,000 bpd per day.

It was not long before the government decided to take business global, and in 1981 the Kuwait Foreign Petroleum Exploration Company (KUFPEC) was formed by KPC to lead international upstream business. KUFPEC has a share in operations in 14 countries, including Canada, Norway, Egypt, Pakistan, Indonesia, Malaysia, China and Australia. Kuwait Petroleum International (KPI), commonly known as Q8, is responsible for international refining and marketing. In December 2017 Bakheet Al Rashidi, the president of KPI, was appointed minister of oil, replacing Essam Abdulmohsen Al Marzooq, who had held the position since December 2016.


As a founding member of the Organisation of the Petroleum Exporting Countries (OPEC), Kuwait has played a key role in its response to the slump in global oil prices beginning in 2014. Production cuts implemented in January 2017 by OPEC members – plus non-OPEC oil producers including Russia, Angola and Venezuela – saw global inventories fall by about 1%, propping up the price of crude. OPEC agreed to decrease output by 1.3m bpd, from 33.8m bpd to 32.5m bpd, with Kuwait reducing output by 131,000 bpd, from 2.84m bpd to 2.71m bpd. Kuwait was also tasked with chairing the committee formed to monitor implementation.

The caps lasted until June 2018 and had a clear effect on oil prices. US Energy Information Administration (EIA) data on monthly spot prices for Brent crude show that oil prices recovered to $69.08 per barrel by January 2018 from $54.58 the previous year. By April 2018 the price had climbed to $72.11, and in the immediate aftermath of US President Donald Trump’s May 2018 decision to withdraw from the Joint Comprehensive Plan of Action that allowed Iran to export oil, the price of Brent crude touched $80. As of October 1, 2018 the price of oil had reached $84.94 per barrel.

Despite the reduction in output, Kuwait’s oil economy saw benefits. Oil exports generated KD15bn ($49.7bn) in sales in 2017, compared with a respective KD12.5bn ($41.4bn) and KD14.6bn ($48.4bn) in 2016 and 2015. This had direct results on the government’s current account deficit, leading to a 6.3% surplus in 2017, from a 4.5% deficit in 2016, according to National Bank of Kuwait (NBK).

“In round numbers, Kuwait produces around 1bn barrels of crude oil per year,” Omar Nakib, senior economist of economic research at NBK, told OBG. “So each US dollar increase in the price produces an additional $1bn in revenues for Kuwait, which is a meaningful increase that has a significant impact on the fiscal position,” he added.

Long-Term Strategy

Although the OPEC-led production caps curbed oil output in 2017 into the first half of 2018, Kuwait’s long-term goals include boosting production of crude and non-associated gas, as well as increasing refinery throughput (see analysis). KPC crude targets include increasing output from 2.7m bdp in 2017 to 4m bpd by 2020 and to maintain this level until 2030. KOC plans to ultimately produce 3.65m bpd from domestic fields, with the remainder coming from the PNZ.

Meanwhile, capacity targets for non-associated natural gas production will see output increase from 215m standard cu feet per day (scfd) in FY 2017/18 to 2bn scfd as of 2040 by enhancing recovery from existing reservoirs and pursuing an aggressive onshore and offshore exploration programme.

With regard to downstream activities, KPC aims to almost double domestic refining capacity, from 701,000 bpd in 2017 to 2m bpd by 2035 through the modernisation of existing refineries and the construction of new facilities.

Internationally, upstream oil and gas production goals include reaching 200,000 barrels of oil equivalent (boe) per day and 650,000 boe in reserves by 2020, as well as a 20% ownership in international upstream assets by 2030. While global downstream aims include securing an oversees refining capacity of 800,000 bpd of Kuwaiti hydrocarbons by 2020.

Oil Fields

From its headquarters in Ahmadi some 40 km south of the capital city, KOC is tasked with managing production of Kuwait’s oil fields. Company annual reports for FY 2017/18 showed that crude production capacity that year registered 3.15m bpd, remaining relatively constant with FY 2016/17 figures, and above 3.02m bpd in FY 2015/16.

The Greater Burgan field, which includes the Burgan, Magwa and Ahmadi fields in Kuwait’s southeast, is the world’s second-largest oil field after the Ghawar field in Saudi Arabia and remains the country’s most productive. Including the smaller Umm Gudair, Minagish and Abduliyah fields, crude production reached 1.68m bpd in FY 2017/18, a decrease on the previous year’s 1.73m bpd.

Regarding fields in the North Kuwait asset, which include the Raudhatain and Sabriyah fields, as well as the Ratqa and Abdali fields on the border with Iraq, crude production reached 763,000 bpd in FY 2017/18, compared to 801,000 bpd in FY 2016/17.

The West Kuwait asset, meanwhile, which includes Upper, Middle and Lower Marrat reservoirs, reached crude production of 530,000 bpd, down only marginally from 536,000 on the previous year.

The government is keen to bounce back from production caps. Across all assets, the total number of new crude oil and non-associated gas wells drilled in FY 2017/18 reached 648, up from 558 and 398 in FY 2016/17 and FY 2015/16, respectively. Of these, 352 Cretaceous development wells were drilled, followed by 276 heavy development, 11 exploratory and nine Jurassic development wells.

Meeting Targets

As it strives to achieve its ambitious production targets, KOC is facing new challenges in extracting heavier grades of oil in some fields while utilising enhanced oil recovery (EOR) techniques to improve production in older fields.

To draw on international expertise and technology, in 2016 KOC signed enhanced technical services agreements with Royal Dutch Shell for the North Kuwait fields and with BP for the Burgan oil field. In FY 2017/18 the first phase of chemical injection test for EOR techniques in the Sabriyah-Modoud reservoir in North Kuwait was completed. That same fiscal year also saw the completions of a single well chemical tracer test in the Raudhatain field, which will extend production at the well.

As part of efforts to better utilise offshore assets, the company also completed field operations at two 3D seismic exploratory surveys in FY 2017/18, with one covering Kuwait Bay and built-up areas while the other concentrated on the Burgan field and Khabrat Ali. As part of the operation, which is one of the largest geophysical projects in shallow water in the world, the surveyors identified and removed three tonnes of explosives and ammunition spread over a 1000-sq-km area: remnants of Iraq’s 1990 invasion. This comes on the back of two new oil field discoveries made in FY 2016/17 with promising quantities of crude. The reservoirs were found in Ratawi Limestone, Minagish and Zubair fields. That year also saw field development begin at five exploratory reservoirs in the Lower Fars, Mudoud, Burgan and Kahlula fields.

However, Kuwait’s success in reaching its production targets will likely involve settling disputes with Saudi Arabia over the two fields in the PNZ. According to EIA estimates, the area holds some 5bn barrels of oil and 1trn cu feet of natural gas. The governments of both countries may be more likely to come to an agreement to boost production volumes now that OPEC has lifted output caps.

Gas Production

While Kuwait has the sixth-highest reserves of any crude oil producer, its domestic demand for natural gas outstrips current supply. Historically, the associated gas encountered in crude oil extraction was burned off at the well-head, but efforts to reduce this flaring have seen Kuwait use nearly 99% of associated gas for production, according to the World Bank. Key drivers of demand include refining and petrochemicals, which account for 60% of gas demand, and water and power generation, responsible for 40%. According to the “BP Statistical Review of World Energy 2018” report, at the end of 2017 Kuwait had 1.7trn cu metres of proven natural gas reserves; representing 0.9% of the global total. Natural gas production has steadily grown over the past decade, from 10.7bn cu metres in 2007 to 17.4bn cu metres in 2017. While natural gas consumption increased from 10.7bn cu metres to 22.2bn cu metres over the same period.

At the same time, Kuwait is slowly building up its capacity to extract non-associated gas, and March 2018 saw free gas production reach peak levels of 264m scfd. This is partly due to concerted efforts to achieve strategic goals of 2bn scfd by 2040. In FY 2016/17, 15 deep wells were drilled to access free gas in the country’s Jurassic formations in the north.

Still, non-associated gas makes a relatively modest contribution to overall production, although this share is growing rapidly. In FY 2017/18 free gas comprised 12.1% of total production, up from 7.7% the previous fiscal year. According to KOC reports, overall gas production levels increased 12.5% from 1.6bn scfd in FY 2016/17 to 1.8bn scfd in FY 2017/18, while average non-associated gas production rose 66.7%, from 129m scfd to 215m scfd over the period.

The engineering design process for the first of four Jurassic Gas Projects was completed in September 2017, and it was reported that engineering companies were being invited to submit tenders for the construction of facilities (see analysis).

LNG Imports

Royal Dutch Shell has been importing LNG to Kuwait since 2010 to free up oil products for export, and in December 2017 KPC announced it had signed another LNG import agreement with the company to help Kuwait meet energy needs. While there was no official disclosure of the volumes being imported, Bloomberg cited sources who estimated the contract would cover 2m-3m tonnes per annum, priced at 11% below a Brent benchmark for 15 years starting in 2020. Shell’s “LNG outlook 2018” report noted that the number of countries importing LNG had quadrupled between 2000 and 2017, while global LNG trade volumes had tripled to 300m tonnes over the period.

Downstream Developments

Domestic refineries are being targeted in Kuwait’s production increases. After the closure of the Shuaiba refinery in March 2017, domestic refining capacity in Kuwait stood at around 736,000 bpd, with the Min Al Ahmadi and Mina Abdulla refineries responsible for 466,000 bpd and of 270,000 bpd, respectively. KPC is looking to nearly double refinery throughput to around 1.4m bpd by 2030.

To help achieve these goals, KIPIC is overseeing the construction and operation of three key projects set to come on-line in the short-to-medium term at Al Zour: a 615,000-bpd refinery due to be completed in mid-2019; an LNG import terminal with a daily capacity of 3trn British thermal units (BTU) set to come on-line in December 2020; and a petrochemicals processing plant with an annual capacity of 2.8m tonnes per annum of aromatics and polypropylene set for 2024.

In addition to this, the country’s existing refineries need to be overhauled to ensure their products meet environmental emissions standards. The Clean Fuel Project, which is being administered by KNPC, is set to bring combined capacity to 800,000 bpd by the end of 2018, with sulphur content in petrol reduced from 500 parts per million (ppm) to 10 ppm, and in diesel gas from 5000 ppm to 10 ppm.

In its 2017 annual report, KPC noted the Clean Fuel Project was 82.5% complete in March 2017, while one year later, Al Rashidi, the minister of oil, told an audience at the Kuwait Investment Forum that 84.8% of the project had been finished.

Overseas Operation

Kuwait has already invested in refining facilities closer to some of its target export markets. KPC’s Italian subsidiary has a 50% share in the $34m Milazzo Oil Refinery in Sicily, with local partner Eni. With an in installed capacity of 80,000 bpd, the refinery’s primary products include liquefied petroleum gas (LPG), gasoline, propylene, kerosene, diesel and fuel oil.

In Vietnam, KPI has a 35% share in a partnership with PetroVietnam, Idemitsu Kosan and Mitsui Chemicals to build the $9bn Nhgi Son Refinery and Petrochemical complex. With a capacity of 200,000 bpd, the refinery will produce jet fuel, diesel, LPG and other petrochemicals, with plans to double capacity to 400,000 bpd by 2025.

Adding to this, in February 2018 KPI announced it was acquiring a 50% share in Oman’s Duqm refinery and petrochemical complex, to be located in the Duqm Special Economic Zone. The refinery will have a capacity of 230,000 bpd and primarily produce naphtha, jet fuel, diesel and LPG, among others.

Power & Water 

A significant proportion of Kuwait’s domestic energy consumption is used to generate electricity and desalinate water. Data from the Ministry of Electricity and Water showed that as of April 2018 there was an installed production capacity of 18.7 GW of electricity and 623.8m imperial gallons per day (MIGD) of water.

Demand for electricity and water reaches its highest points in the summer months, with the most recent peak loads reaching more than 13,000 MW per day in August 2018. Residents consumed more than half of all the electricity produced in 2016, with 48% supplied to private homes and a further 6% to those living in Public Authority for Housing Welfare properties. Expatriates living in investment buildings consumed 16% of the total, with 11% used by commercial premises, 10% by government offices, 6% by industry and 3% for agriculture.

Although Kuwait has modest supplies of groundwater, the country’s growing population is largely reliant on desalination for fresh water supplies. In 2016 average per capita residential water consumption was 275.8 litres, a slight increase on the previous year, but lower than the highest point in 2002, at 359 litres per person.

Although total energy used to meet electricity and water demand increased 12.8% between 2012 and 2016, from 630,067bn BTU to 710,980bn BTU, falling prices meant the cost more than halved from KD2.4bn ($8bn) to KD1bn ($3.3bn) over the same period. In 2016, 36% of energy needs were met by natural gas, with oil and petroleum products accounting for the remainder. Meanwhile, utility plants used 58.2m barrels of liquid fuel in 2016, 86% of it heavy oil, 10% gas oil and 7% crude.


Fluctuating crude oil prices have a profound effect on Kuwait’s economy, but the government has shown it is prepared to continue investing in the industry even in times of lower revenues. Within five years, the sector will have new domestic facilities enabling it to produce and market clean fuels, as well as increased production capacities for both crude oil and natural gas. Its ability to meet ambitious long-term targets will be also depend on dispute resolution in the PNZ; ongoing co-operation with international energy companies in exploration and extraction in new and challenging fields; and in growing local and global demand for primary energy.