Kuwait says drilling, facilities work underway to reverse declining oil production capacity

Kuwait will be able to unlock some 500,000 b/d of potential output capacity in the next two years, the head of its state oil company said Oct. 22, seeking to allay concerns over the firm's own admission that its ability to pump crude had declined for the third straight year.

In its latest annual report, released earlier in the month, Kuwait Oil Co. said its maximum sustainable production capacity had fallen to 2.579 million b/d as of March 31, down 572,000 b/d from 2018.

However, that "doesn't provide a complete picture of the Kuwaiti oil sector's performance in general, nor KOC's performance," parent company Kuwait Petroleum Corp. CEO Hashem Hashem said in a statement, carried by the official KUNA news agency.

He said a drilling program of 500 wells annually and construction of two gathering centers, as well as water injection facilities and other infrastructure, were currently underway to achieve a 500,000 b/d capacity boost in the next two years.

That will eventually enable the country to reach a potential output rate of 3.2 million b/d in 2025, in addition to a projected 350,000 b/d from Kuwait's share of production from the Neutral Zone it shares with Saudi Arabia, Hashem said.

From 2035-2040, Kuwait hopes to have capacity up to 4 million b/d -- a significant downgrade from the plans revealed in 2018 to have 4.75 million b/d by 2040.

Kuwait pumped 2.47 million b/d in September, its most since it hit a record high of 3.15 million b/d in April 2020, making it OPEC's fifth-biggest producer, according to estimates compiled by S&P Global Platts.

In September, Kuwait announced plans to invest $6.1 billion on exploration over the next five years.

Analysts have cast doubt on the production targets, noting that the country's oil sector has been hampered by political instability, which has seen a succession of short-tenured oil ministers and much turnover of leadership positions at KPC and its subsidiaries.

Several expansion projects have seen delays, including on its giant Burgan field.

OPEC+ cuts

Hashem acknowledged COVID-19 significantly impacted several of KOC's projects, but said a new gathering center to handle 100,000 b/d of crude had recently become operational, as well as new facilities to handle Lower Fars Heavy Oil, with production of 60,000 b/d.

He added that Neutral Zone output should regain its previous levels of some 500,000 b/d in 2022. Work in the zone had been suspended for years due to a political dispute between Kuwait and Saudi Arabia, before the two sides resolved their differences and resumed production in April 2020.

For now, Kuwait's production remains capped under an accord between OPEC, Russia and several other allies, which aims to gradually eliminate historic cuts implemented during the pandemic by late 2022 by raising output 400,000 b/d every month.

But several key OPEC+ customers, including the US, Japan and India, have called on the alliance to increase production faster, to address soaring oil prices. So far, OPEC+ ministers have indicated they are unlikely to diverge from their plan.

"The state of Kuwait is always committed to fulfilling its customer needs and continuing its role as a secure and reliable crude and petroleum product supplier to the international markets," Hashem said.

Oil minister Mohammed al-Fares had said Oct. 21 that Kuwait "is able to increase its production in line with the OPEC+ agreement" and that supply can be increased "according to the market's needs."