In this interview, Jamal Abdul Aziz Jaafar discusses how KOC is looking for partners to help it extract oil from “new frontier” oilfields both onshore and offshore, as the company looks to boost production as part of its long-term 2040 Strategy.
U.S. oil companies, manufacturers, and suppliers of oilfield equipment have always experienced strong receptivity in the Kuwaiti market. KPC primarily uses American Petroleum Institute standards in their requests for proposals, which benefits U.S. manufacturers and suppliers. Kuwait Oil Company (KOC) has a competitive procurement division eager for U.S. technology. Please elaborate on how knowledge exchange between the two nations can benefit the oil sector in Kuwait.
I would like to start by saying this part of the world has been blessed with an abundance of hydrocarbon resources, and it is our belief that KOC’s reserves will allow us to produce oil and gas for the next 100 years or more. We have also been blessed with the lowest production cost per barrel in the world. Together, our massive reserves and low production costs have been the primary driver of Kuwait’s oil production.
Kuwait’s oil fields were only discovered 80 years ago, and we have, on the whole, utilized the same means of production today as we did then. However, over time this began to pose a challenge for us, as it has become more difficult to maintain optimum production from the fields while retaining our low cost of production. So far, we have continued to maintain our low cost of production, but this low-cost production scenario will likely change at some point in the future.
At KOC, we understand the importance of acquiring and utilizing new forms of technology. These technologies are sometimes required to be tailor-made for the producing fields within our areas of operation. We therefore depend heavily on technology providers in the United States, many of whom are pioneers in the field of drilling and well completion.
It should be noted that our relationship with American companies has been very close since the first day oil came up out of the ground in Kuwait. Historically, we have depended on companies like Schlumberger, Halliburton, Baker Hughes, General Electric, and so on. All these companies continue to provide us with services that are essential for all aspects of our operations.
Our reliance on American companies does not stop with oilfield service providers. For example, KOC does much in the way of providing our employees with the best possible resources in the field of training, and we depend on a number of American institutions for this undertaking. Universities such as Harvard and Texas A&M have been critical components in the provision of necessary, tailored training for KOC employees.
Our collaboration with American universities has produced a number of good results. We currently have 40-50 talented KOC employees who have received specialized training and who are now applying those skills within the Company. In addition, we at KOC also depend on a special type of research called piloting, whereby we attempt to address problems that are unique to our fields. In this regard, we have formulated a Memorandum of Understanding with universities such as Texas A&M, the University of Tulsa in Oklahoma, and USC. All these universities are providing us with piloting programs which seek to find solutions to the unique challenges we have.
During our meeting with H.E. Bakheet Shabib Al Rashidi (Minister of Oil, Electricity, and Water of Kuwait), he explained to us that the rising global demand for refined products has prompted Kuwait to boost refinery capacity. Can you tell us about the production and expansion plans for KOC?
KOC has both short-term plans and long-terms plans, with our long-term plan defined under our recently approved 2040 Strategy. In part, the 2040 Strategy defines production targets that KOC should maintain from 2040 and beyond. Crude capability figures stand at 4.25 million barrels while our current production figures stand in the range of 3.1 million. This means that we will definitely have to increase our capacity between now and 2040, whether through new exploration projects or going back into new frontiers. For example, offshore is a new frontier for us that has not been tackled yet, and we plan to conduct initial work by the end of this year. However, we must try to maintain and boost production from our existing fields, and this can only be done through direct partnerships with our business partners who are specialists in their respective fields.
In terms of heavy oil production, we are currently in the range of 20,000 barrels per day. This year we should hit 60,000, but the ultimate goal is 400,000 barrels a day. This represents a huge target that needs a significant amount of investment, and many of our current and future projects are in the field of heavy oil alone. As mentioned previously, the field of heavy oil is an area which KOC lacks expertise, and we will therefore be drawing on the specialized skills and knowledge of our partners.
Traditionally, we have produced the type of crude we refer to as “easy oil.” But the complex, heavy oil – deep Jurassic resources, deeper frontiers, and the high-sulphur, high-CO2 type of crude – are new frontiers. Again, offshore is also a new frontier for us. With this combination, we are targeting 400,000 barrels from the heavy and around 600,000 from new oil. New oil means offshore and any new fields that have not yet been explored.
KOC recently completed 2D and 3D seismic research for both offshore and onshore resources. The only two areas left are West Kuwait and Boubyan Island. Once surveys have been completed, we will have a complete picture on the resources available in Kuwait, and we believe both areas show good promise for future production. It should be noted that KOC plans to invest heavily in these areas. In the next five years, we plan to spend around $200 billion in exploration, drilling and service facilities. That figure is quite large and requires us to be a more dynamic company. Our people need to think outside the box in order to achieve this, as the year 2040 is not too far away. We will also depend on our relationships with our partners, who I have previously mentioned are specialists in their fields. In this regard, we currently have two companies working with us on a type of enhanced technical service agreement. Our plan is to have more international companies come in and help with our offshore operations and our work in West Kuwait, in addition to a number of new fields which pose a number of production challenges.
Can you please share a final message about Kuwait with our readers?
Kuwait will continue to play a very vital role in the international oil market, and we are committed to a stable Kuwait. KOC is a source of income for the country, and we try to maintain stability within the Company and within our fields. One of our top priorities, therefore, is to take good care of our employees. We try to maintain a very good record in terms of health services and environmental protection, and we are always searching for more ways to create a more dynamic organization that is capable of quickly adapting to changes in the market.