Oil & Gas

‘Huge’ oil discovery could change the game for Kuwait

July 15, 2024, 11:23 AM

According to the US International Trade Administration, Kuwait holds about 7 percent of global oil reserves and has a current production capacity of about 3 million bpd

Al-Nokhatha may hold 2.1bn barrels
Production to start as soon as possible
Equivalent to three years’ production

Kuwait has announced a significant discovery of light oil and associated natural gas in its offshore Al-Nokhatha field.

The state-owned Kuwait Oil Company (KOC) – a subsidiary of Kuwait Petroleum Corporation (KPC) – reported on Sunday that the field, located east of the Kuwaiti island of Failaka, holds approximately 2.1 billion barrels of light oil and 5.1 trillion cubic feet of natural gas, equivalent to 3.2 billion barrels of oil.

It said it plans to start production from the field as soon as possible.

KPC’s CEO, Sheikh Nawaf Saud Nasir Al-Sabah, said on X – formerly Twitter – that the new discovery’s reserves were equivalent to the country’s entire production over three years.

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According to the US International Trade Administration, the Gulf state holds about 7 percent of global oil reserves and has a current production capacity of about 3 million barrels per day (bpd).

Kuwait, the least diversified oil producer in the region, draws 95 percent of its export revenues from oil, which represents about 90 percent of government income. However, it has become an importer of liquefied natural gas and electricity as it struggles to meet its soaring energy demand, particularly during the peak summer season.

The latest discovery is being hailed as a pivotal moment for Kuwait’s oil and gas industry, which recorded a slump last year as a result of Opec-mandated cuts.

The country is Opec’s fifth-largest producer behind Saudi Arabia, Iraq, the UAE and Iran, but it had limited its output to about 2.55 million bpd in 2023 and 2.4 million bpd this year, according to the latest July Opec report.

Kuwait’s oil GDP contracted 4 percent in 2023, after a robust expansion in 2022, when Kuwait’s oil output and exports recorded double-digit increases to balance a tighter oil market shaken by Russia’s invasion of Ukraine, according to a National Bank of Kuwait report published last week.

However, the 2022 expansion was exceptional, as, during seven of the last 10 years, “oil GDP growth has tended to be negative, fluctuating in line with Opec supply policy,” noted NBK.

Besides Opec cuts, Kuwait’s upstream industry faces challenges from political instability and parliamentarians’ reluctance to allow foreign investment, according to reports. The oil ministry has undergone significant turnover in recent years.

Kuwait’s Greater Burgan field – the world’s second-largest – is also ageing.

KPC’s Al-Sabah said in March that the country is seeking to accelerate new oil and gas discoveries in line with plans to increase its production capacity to 4 million bpd by 2035.

It plans to spend $44 billion on oil production, exploration and “other projects” through 2025.

The state has also invested heavily in upgrading and expanding its domestic refining capacity. The $30 billion Al-Zour Refinery project, which became fully operational in 2023, is expected to increase Kuwait's total refining capacity to 615,000 barrels per day by the end of 2023.

At the beginning of July, Kuwait’s neighbour Saudi Arabia announced seven new oil and gas deposits in the Eastern Province and Empty Quarter.

The Middle East accounted for 10 percent of the discovered oil and gas volumes last year. Upstream investment reached $94 billion in the region in 2023.