Kuwait Oil and Gas Report Q4 2009

Kuwait Oil and Gas Report Q4 2009

The latest Kuwait Oil & Gas Report from BMI forecasts that the country will account for 2.71% of
Middle East (ME) regional oil demand by 2013, while providing 10.35% of supply. Regional oil use of
8.24mn barrels per day (b/d) in 2001 rose to 11.25mn b/d in 2008. It should average 11.30mn b/d in 2009
and then rise to around 12.17mn b/d by 2013. Regional oil production was 22.87mn b/d in 2001 and in
2008 averaged 26.29mn b/d. It is set to rise to 28.01mn b/d by 2013. Oil exports are growing steadily,
because demand growth is lagging the pace of supply expansion. In 2001, the region was exporting an
average 14.63mn b/d. This total had risen to 15.04mn b/d in 2008 and is forecast to reach 15.84mn b/d by
2013. Iraq has the greatest production growth potential, followed by Qatar.
In terms of natural gas, the region in 2008 consumed 391.5bn cubic metres (bcm), with demand of
512.8bcm targeted for 2013, representing 31.0% growth. Production of 389.5bcm in 2008 should reach
610.4bcm in 2013 (+56.7%), which implies net exports rising to 98bcm by the end of the period. Kuwait
in 2008 consumed 3.27% of the region’s gas, with its market share forecast at 4.93% by 2013. It
contributed 3.29% to 2008 regional gas production and by 2013 will account for 3.16% of supply.
For 2009 as a whole, we are now assuming an average OPEC basket price of US$55.00 per barrel (bbl), a
41.5% decline year-on-year (y-o-y). This represents an upgrade from the US$52 forecast we have stuck
with during the past three quarters. Our OPEC basket assumption delivers likely Brent, WTI, Urals and
Dubai prices of US$56.30, US$57.50, US$55.60 and US$55.60/bbl respectively. For 2010, we expect to
see a recovery to US$60.00/bbl for the OPEC price (up from our previous forecast of US$58), gaining
further ground to US$65.00 in 2011 and to US$70.00/bbl in 2012. Our post-2010 forecasts are unchanged
and we are continuing to use a long-term price assumption of US$70.00 for 2013-2018.
In 2009, BMI is now assuming a global average gasoline price of US$62.12/bbl, with the fuel having
peaked in June. The overall y-o-y fall in 2009 gasoline prices is put at 40.0%. The BMI gasoil forecast is
for an average price of US$68.62/bbl, assuming a monthly high of US$92.49/bbl in December. The fullyear
outturn represents a 43.4% fall from the 2008 level. The annual jet price level for 2009 is forecast to
be US$65.17/bbl. This compares with US$124.95/bbl in 2008. The 2009 average naphtha price is put by
BMI at US$49.06/bbl, down 43.9% from the previous year’s level.
Kuwaiti real GDP is now forecast by BMI to fall by 1.0% in 2009, following growth of 6.3% in 2008.
We are assuming 2.1% growth in 2010, 2.5% in 2011, followed by 3.4% in 2012 and 3.7% in 2013. We
expect oil demand to rise from 300,000b/d in 2008 to 330,000b/d in 2013, lagging the underlying rate of
economic expansion. State oil company Kuwait Petroleum Corporation (KPC) is responsible for all
domestic oil and gas operations. In spite of the absence of near-term international oil company (IOC)
investment, crude production is forecast to increase from 2.78mn b/d in 2008 to 2.90mn b/d in 2013,
subject to OPEC quotas. Gas production should reach 19.3bcm by 2013, up from 12.8bcm in 2008.
Consumption is expected to rise from 12.8bcm to 25.3bcm by the end of the forecast period, requiring
imports of 6.0bcm.
Between 2008 and 2018, we are forecasting an increase in Kuwaiti oil production of 29.3%, with crude
volumes rising steadily to 3.60mn b/d by the end of the 10-year forecast period. Oil consumption between
2008 and 2018 is set to increase by 29.2%, with growth slowing to an assumed 3.0% per annum towards
the end of the period and the country using 388,000b/d by 2018. Gas production is expected to climb to
almost 27bcm by the end of the period. With 2008-2018 demand growth of 204%, this provides an import
requirement rising to more than 12bcm by 2018. Details of the BMI 10-year forecasts can be found in the
appendix to this report.
Kuwait still occupies ninth place in BMI’s updated Upstream Business Environment rating, which is a
surprising outcome in view of its vast oil and gas wealth. It is just one place ahead of Saudi Arabia, but
should be safe from any immediate challenge thanks to a comfortable margin. The country’s score suffers
from strict government control of the upstream industry, undermining the healthy resource position. The
country is in the lower half of the league table in BMI’s Downstream Business Environment rating, with
a few high scores and near-term progress up the rankings a possibility. It is ranked ninth ahead only of
Iraq, thanks largely to excellent country risk factors that outweigh a highly regulated and largely statecontrolled
industry. Iran and Bahrain are immediately above it in the regional rankings, but are unlikely to
pull further away during the next few quarters.

Executive Summary ....5
SWOT Analysis............7
Kuwait Political SWOT...... 7
Kuwait Economic SWOT.... 8
Kuwait Business Environment SWOT ... 9
Kuwait Energy Market Overview..10
Regional Energy Market Overview ............12
Oil Supply And Demand........ 12
Table: Middle East Oil Consumption (000b/d) . 13
Table: Middle East Oil Production (000b/d) .... 14
Oil: Downstream .... 15
Table: Middle East Oil Refining Capacity (000b/d)........ 15
Gas Supply And Demand ...... 16
Table: Middle East Gas Consumption (bcm) .... 16
Table: Middle East Gas Production (bcm) ....... 17
Liquefied Natural Gas........... 18
Table: Middle East LNG Exports/(Imports) (bcm).......... 18
Business Environment Ranking ..19
Middle East Region. 19
Composite Scores............. 19
Table: Regional Upstream Business Environment Rating.... 20
Table: Regional Downstream Business Environment Rating............. 21
Upstream Scores 21
Downstream Scores ......... 21
Kuwait Upstream Rating – Overview.. 22
Kuwait Upstream Rating – Potential Returns ... 22
Kuwait Upstream Rating – Risks To Potential Returns... 22
Kuwait Downstream Rating – Overview........... 22
Kuwait Downstream Rating – Potential Returns ............ 23
Kuwait Downstream Rating – Risks To Potential Returns ... 23
Business Environment ..24
Legal Framework.... 24
Infrastructure..... 25
Labour Force..... 26
Foreign Investment Policy .... 27
Tax Regime ........ 28
Security Risk . 28
Industry Forecast Scenario ..........30
Oil & Gas Reserves. 30
Oil Supply & Demand........... 30
Gas Supply & Demand.......... 31
Liquefied Natural Gas........... 32
Refining & Oil Products Trade........... 32
Revenues/Import Costs.......... 33
Table: Kuwait Oil & Gas – Historical data & Forecasts 34
Other Energy ..... 35
Table: Kuwait Other Energy – Historical data & Forecasts 36
Key Risks To BMI’s Forecast Scenario.... 36
Long-Term Oil & Gas Outlook ........... 36
Macroeconomic Outlook 37
Table: Kuwait – Economic Activity, 2005-2013 40
Competitive Landscape.41
Executive Summary.......... 41
Table: Key Players – Kuwaiti Oil & Gas Sector............. 41
Overview/State Role 42
Table: Key Upstream Player.......... 43
Table: Key Downstream Player..... 43
Company Monitor......44
Kuwait Petroleum Corporation (KPC) .... 44
Kuwait National Petroleum Company (KNPC)...... 48
Glossary of Terms.....51
Oil & Gas Ratings: Revised Methodology 52
Introduction ....... 52
Ratings Overview.... 52
Table: BMI Oil & Gas Business Environment Ratings: Structure ...... 53
Indicators........... 54
Table: BMI Oil & Gas Business Environment Upstream Ratings: Methodology... 54
Table: BMI Oil & Gas Business Environment Downstream Ratings: Methodology ............ 55
Oil & Gas Outlook: Long-Term Forecasts 57
Regional Oil Demand ........... 57
Table: Middle East Oil Consumption (000b/d) . 57
Regional Oil Supply 58
Table: Middle East Oil Production (000b/d) .... 58
Regional Refining Capacity .. 59
Table: Middle East Oil Refining Capacity (000b/d)........ 59
Regional Gas Demand .......... 60
Table: Middle East Gas Consumption (bcm) .... 60
Regional Gas Supply............. 61
Table: Middle East Gas Production (bcm) ....... 61
Kuwait Country Overview..... 61
Methodology & Risks To Forecasts .... 62
BMI Forecast Modelling.63
How we generate our industry forecasts .. 63
Energy Industry . 64
Cross Checks ..... 64
Sources 64