Page 4 - MEOG Week 25 2022

MEOG COMMENTARY MEOG

KOC to begin offshore

drilling amid expansion push

Kuwait is set to begin offshore exploration as it continues with an

ambitious upstream push, but it is yet to decide on a funding strategy.

KUWAIT STATE-OWNED Kuwait Oil Co. (KOC) is near- period. Drilling was scheduled to start in mid-
ing the start of offshore drilling, three years since 2020, with the first rig due to arrive in July 2020
the contract for the work was awarded. The move and the second in January 2021.
WHAT: comes as the country works to reach a higher The first well was then pushed back until
KOC has taken delivery of OPEC+ quota while closing in on current out- October 2021, before further delays saw this date
the first rig that will carry put capacity and investing to expand this much slip into 2022.
out Kuwait’s first offshore quicker than anticipated, taking advantage of a KOC has signed a co-operation protocol with
exploration campaign. bull market. the Ministry of Defence to ensure that the drill-
ing locations have been swept for mines, with
WHY: Offshore effort seismic surveys indicating that the offshore area
The company is tasked In mid-2019, KOC signed a 181.4mn-dinar could hold billions of barrels of crude.
with expanding national ($597mn) in with US firm Halliburton to drill KOC, which is the domestic upstream oper-
oil production capacity six exploratory wells offshore Kuwait. ating arm of Kuwait Petroleum Corp. (KPC),
while goalposts appear KOC’s acting CEO Khaled Al-Otaibi told has been promising to start drilling offshore for
to continually shift for local, Arabic-language media that the delay many years, with separate surveys completed by
the country’s ambitious in commencing offshore activities was related Canada’s Sander Geophysics and China’s BGP
targets. to supply chain issues relating to rig fabrica- during the first half of the decade.
tion owing to the Covid-19 pandemic. He said Halliburton’s contract award came 18 months
WHAT NEXT: that since the unit was completed, it has been after KOC was reported to have invited the firm
Parent firm KPC is inspected in Dubai, following which modifica- and fellow US oilfield services companies Bak-
considering various tions were required. erHughes and Schlumberger to submit bids for
options for funding the When the Halliburton deal was announced, the drilling campaign. At that point, it was noted
expansion, including KOC’s then-CEO Emad Sultan said that the that two sites had been selected – one inside and
loans and potential asset campaign would add 100,000 barrels per day one outside Kuwait Bay.
monetisation. (bpd) to Kuwaiti production. He added that two
rigs would be utilised in the project’s first phase. Capacity expansion
Local media has since reported that the drilling By its own admission, KOC’s maximum sus-
campaign would last three years. tainable capacity (MSC) dropped to 2.7mn bpd
Speaking on the sidelines of the Qatar Eco- last year. While Middle East Oil & Gas (MEOG)
nomic Forum, Sheik Nawaf Saud al-Sabah, understands that this figure has risen by 100,000-
CEO of KOC’s parent Kuwait Petroleum Corp. 200,000 bpd, largely thanks to concerted effort
(KPC) said this week: “We’ve been producing to build out the Partitioned Neutral Zone (PNZ)
onshore for almost 90 years now and now we’re it shares with Saudi Arabia, production reached
moving on to the offshore for the first time […] 2.69mn bpd in May, leaving little wiggle room.
We should have good news on that sometime It is worth noting that KOC includes its share
soon.” He added that the first rig was delivered of the PNZ in figures for both production and
last week. capacity, while its Saudi counterpart Saudi Ara-
The project’s first phase is seen comprising a mco has traditionally omitted the shared fields
year of preparatory work on the first drilling rig, in MSC while including their production in its
then 18 months on the second unit. output reporting.
Following its contract award, Halliburton Al-Sabah said: “We always like to maintain
agreed to charter two jack-up drilling rigs from spare capacity about 10% to 15% above where
Chinese drilling contractor China Oilfield we need to be just in case of supply disruptions
Service Ltd (COSL). This stipulated that as a around the world.”
sub-contractor, COSL would deploy two jack-up Based on May output, this would suggest
rigs – Oriental Dragon and Oriental Phoenix – an MSC figure of 2.96-3.1mn bpd. However,
to drill six high-pressure, high-temperature Bloomberg quoted him as saying that Kuwait’s
wildcats off Kuwait over a three and a half-year production is running at around 3.5mn bpd.

P4 www. NEWSBASE .com Week 25 22•June•2022