In this interview, Minister of Oil Bakheet Al-Rashidi discusses the major oil and gas projects in Kuwait and across the world, as the nation looks to boost its capacity in refined products and petrochemicals.
Can you give us your insight into Kuwait’s comprehensive strategy to adapt to a transforming global energy landscape?
KPC’s 2040 strategic direction has set an ambitious road map for the Kuwaiti oil sector to execute mega projects inside and outside the State of Kuwait on various aspects, with the ultimate goal to maximize revenue generation for the Kuwaiti economy. The 2040 strategic directions have been derived considering three scenarios that carefully deal with various future challenges. Some of the main global trends are the US shale drive, the shifting oil demand from Europe to Asia, the rising global demand for refined products, petrochemicals and natural gas, and the inevitable move towards renewable energy resources.
Inside Kuwait, the oil and gas growth strategy is bridging the demand gap, as well as making energy more accessible to consumers in emergent economies and the developing world. As rising oil prices help to strengthen its fiscal position further, Kuwait is ready to face this challenge head-on and has a comprehensive strategy for its energy sector, which includes boosting oil and gas upstream output, increasing upstream efficiency, investing in downstream and petrochemicals, opening up the energy sector to private investment and increasing its renewable energy capacity. In the midst of rising global energy demand over the coming decades, such measure will help to strengthen Kuwait’s international role in energy security.
What is your view of US-Kuwait Trade and Investment ties?
Half a century after the establishment of the diplomatic relationships between Kuwait and The United States and 30 years after the US helped Kuwait in our quest to independence and sovereignty, the bilateral relationships between the two countries are growing stronger by the day. 2016 marked an exemplary milestone when the total US-Kuwait trade reached $6.6 billion. Today, as Kuwait sets its national long-term development plan as part of vision 2035 to build a diversified economy, our focus is to strengthen our foreign direct investment and build stronger trade relations with the US and other allies and strategic countries.
All the development that we are witnessing today provides solid ground for the US to play an even bigger role in our development efforts whether through facilitated investments in a wide range of sectors, knowledge exchange, and incentivized cooperation with our SME sector. At the same time, Kuwait is committed to being a strong ally to the US through investment, liberalizing and diversifying our economy, and supporting the US in the fight against terrorism.
How can knowledge exchange, between the two nations benefit the energy sector in Kuwait?
Transfer of technology and know-how is critical to the development of the oil sector in Kuwait. We have already seen the impact of these new technologies in the oil and gas business. Future risks and challenges do promote valuable opportunities and enhance cooperation and collaborations among various partners within the industry. Technological advancements have unlocked unconventional resources, changing trade dynamics greatly and aggravating markets disturbance, but have positively improved cooperation and coordination.
The industry continues to focus on producing hydrocarbons in the most efficient and cost effective methods. US oil companies, manufacturers, and suppliers of oil field equipment have always experienced strong receptivity in the Kuwaiti market. KPC primarily uses American Petroleum Institute standards in their requests for proposals, which benefits US manufacturers and suppliers.
The Kuwait Oil Company (KOC) has an aggressive procurement division eager for US technology. Although Kuwait does not allow private sector investment in the upstream oil market, the oil and gas sector will continue to be a leading sector for US businesses in the future. Best prospects in this sector include – but are not limited to – consulting services, EPC services, refining technologies, environment consultants, control and instrumentation systems, and secondary recovery systems. The demand for drilling services and equipment will be strong due to Kuwait’s goal of increasing its oil and gas production capacity over the next ten years by developing heavy oil fields and offshore.
Please elaborate on the $8 billion investment in overseas petrochemicals projects in the US, Bahrain, Canada, and South Korea.
We in KPC believe that petro-chemicals is an important arm to maximize KPC’s Value Chain returns and we are focusing on expanding our commodity chemical portfolio. KPC will seek benefit from the experience and the technological advantages of joint venture partners to reach further down the hydrocarbon chain and ensure diversification towards specialty and derivative petrochemicals. The projects include new petrochemical plants and expansion of existing units owned jointly by Petrochemicals Industries Company (PIC), a subsidiary of the government-owned Kuwait Petroleum Corporation.
One project involves the construction of an ethylene glycol plant in the United States with a production capacity of 750,000 tons per year. PIC also has plans to build a propylene and polypropylene plant in Canada with a capacity of 550,000 tons per year as a joint venture with a local Canadian firm. PIC also wants to manufacture polypropylene at its South Korean unit SK Advanced, which currently produces propane dehydrogenation (PDH) and is a joint venture with the Asian country’s largest LPG importer, SK Gas, and Saudi Arabia. In Canada, PIC is in negotiations with gas company Pembina.
In addition, among the petrochemical projects inside and outside Kuwait are the following:
What are the governments’ plans to open up the industry to private investment taking into consideration that Kuwait aims to produce 15% of power from renewable energy by 2030?
Kuwait’s current direction to develop business includes supporting the local innovation and SME ecosystem, enhancing industry to increase its competitiveness, providing incentives for new strategic sectors, and developing and collaborating with international companies to implement mega-projects.
HH the Amir of Kuwait, Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah, called for 15% of Kuwait’s energy mix to be comprised of renewable energy. The Ministry of Electricity and Water hopes to achieve a rate of 10% of its national energy capacity through renewables by 2020 and 15% by 2130.
We consider the vision of HH the Amir of Kuwait as a national commitment, despite the challenge it represents. It is my firm belief that Kuwait’s oil sector will contribute to making HH the Amir’s vision into reality. Together with our strategic partners in the government as well as the private sector, I believe we will succeed in expanding the energy production mix that we require in the 21st Century. Renewable energy is our future choice. Adopting clean energy for our domestic power production is an obvious choice.
On one hand, it is economically sound and viable. Furthermore, renewable energy allows us to free up more of our hydrocarbons for export. More importantly, renewable energy contributes to a cleaner atmosphere and healthier society. Some of the groundwork to turn this into reality has already been laid down, which includes gasoline stations, power plants, and transforming buildings to be green besides more other initiatives.
We have designed and submitted several renewables projects under the UNFCCC clean development mechanism program. Energy efficiency systems have been installed at a number of Kuwait National Oil Company (KOC) and Kuwait National Petroleum Company (KNPC) facilities. This is in addition, to the many sola photovoltaic systems that are currently being utilized for a variety of oil operations, especially at KOC.
Together with Kuwait’s Ministry of Electricity and Water, and Kuwait Institute for Scientific Research, Kuwait’s oil industry has initiated a number of large-scale renewable energy projects that are geared toward producing 15% of our energy requirements. KPC is also pursuing AL Dibdibah Solar Power Plant to fulfill his highness the Emir’s vision on having 15% of Kuwait’s energy demand being satisfied by renewable energies.
How will KPC boost production capacity to 4.75mm (bpd) by 2040 (up from current 3.1 bpd) and increase gas production to four billion cubic per day by 2030?
Kuwait maintains the prospect of prosperity for energy demands locally, regionally, and globally; while ensuring continued growth and success. The 2040 strategic direction includes achieving four million barrels per day of crude oil production by the year 2020 and creating the mechanisms to maintain such production levels.
Furthermore, we will be maximizing exploration activities, as well as the development and production of non-associated natural gas in Kuwait with a target to achieve 2.5 Billion Standard Cubic feet per day by the year 2040. Some of the major upstream capital projects are as follows:
Kuwait has proven its role as a reliable and secure supplier toward the growing Asian demands.
It has achieved this not only by providing oil supplies, but also through maintaining and expanding its relations with the countries in Asia and across the globe.
As the rising global demand for refined products prompts Kuwait to boost refinery capacity, what are some of the new projects for expanding KPC’s refining capacity?
The 2040 strategic direction calls for the expansion of refining capacities inside and outside Kuwait. Current refinery projects include the “Clean Fuels Project”, which will upgrade and expand the Mina Abdulla and Mina Al-Ahmadi refinery complexes.
The new KPC subsidiary, Kuwait Integrated Petrochemical Industries Company (KIPIC), will manage refinery, petrochemicals and LNG import operations in the Al-Zour complex. The complex will be formed by integrating the Al-Zour refinery with the planned Petrochemicals Complex and a gas supply facility. So, some of major downstream capital projects currently under implementation include:
What would you say have been your greatest achievements during your time representing the people of Kuwait?
In the Kuwait Oil Sector, we are proud that our achievements and work pattern is based on team spirit and this is why we have been successful. However, there are some projects that I personally feel proud to have been part of, such as the “Nghi Son” Vietnam project. KPI’s share in the joint venture building the refinery complex is 35.1 percent, a stake that is matched by Japan’s Idemitsu Kosan. Local energy giant Petro-Vietnam has a 25.1-percent stake in the project, while another Japanese firm, Mitsui Chemicals, holds the remaining 4.7 percent.
Vietnam today is one of the major customers for our products, and it is important that we have secure outlets for Kuwaiti crude, and we know that refineries are the backbone of any industry. Any country that wants to develop its industrial activities needs to start with a refinery. The main challenge is to make sure those projects are sustainable and profitable. We need to manage that growth in Asia, and we need to make sure that projects are good for us, for our partners, and good for the country we are operating in.
Please share a final message about Kuwait with our readers.
We extremely value our partnership with the US and are keen to expand and enhance such relations further. KPC 2040 is the road map for us to execute mega projects inside and outside Kuwait on various aspects, to optimize revenue generation for Kuwaiti Economy. Kuwait has undertaken significant steps toward enhancing its vital role in energy security, as well as toward the protection and preservation of the natural environment, which remains one of our top priorities.
A key challenge will be to manage energy resources to ensure both high living standards and sustainable growth in the long term. Being aware of challenges, producers in the region are undertaking a variety of measures to ensure long-term sustainable growth.
Some of these measures are: (1) introducing energy-efficiency measures; (2) investing in clean fuel and renewable energy supplies; and (3) changing the consumer mindset and promoting conservation. Kuwait has proven its role as a reliable and secure supplier towards the growing Asian demands.
It has achieved this not only by providing steady oil supplies, but also through maintaining and expanding its relations with the countries in Asia and across the globe. All previously mentioned projects would require massive efforts and respective resources. Therefore, we are working together with financial institutions to achieve strategic partnerships with the objective of finding optimum financing solutions for funding our current and future projects.