Factors Contributing to Decrease in Kuwait’s Oil Production

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Dr. Saad Al-Barrak, the Deputy Prime Minister, Minister of Oil, Minister of State for Economic Affairs and Investment, and Chairman of the Board of Directors of the Petroleum Corporation, has shed light on the various factors behind Kuwait’s decline in oil production. These factors have had a significant impact on the country’s commitment to its production quota as per agreements with the Organization of the Petroleum Exporting Countries (OPEC).

In response to a parliamentary inquiry from MP Dr. Abdulaziz Al-Saqabi, Al-Barrak highlighted the primary reasons for the decline. One major factor is the delay in crucial production projects, which can be attributed to lengthy documentary cycles, complexities, and overlapping responsibilities between the Kuwait Oil Company and entities handling tenders. This includes the technical committee of the Central Agency for Public Tenders (CAPT), which, according to Al-Barrak, did not prioritize exploration and production projects critical for state revenues.

Al-Barrak further explained that the lack of a mechanism to expedite project approvals or consider the unique nature of sector projects, particularly their technical aspects, contributed to the equal treatment of oil sector projects alongside other state initiatives by the CAPT. This approach has had adverse effects on oil production volumes and the state’s financial revenues.

The second major reason identified by Al-Barrak is the delay in approving tenders from the agency, impacting essential contracts related to flow pipe projects. In some instances, this delay has spanned three years, resulting in a production delay equivalent to over 200,000 barrels of crude oil and 100 million cubic feet of associated gas per day. Al-Barrak estimates that the losses for Kuwait Oil in 2022 due to these delays will exceed 2 billion dinars.

Furthermore, Al-Barrak highlighted the negative impact of delays in water treatment, injection projects, and production unit projects on the health and efficiency of Kuwaiti oil and gas fields. He warned that continued delays by the CAPT in approving strategic projects for Burgan Field could lead to a reduction in production capacity, negatively affecting financial revenues and the sustainability of production.

The third reason, as per Al-Barrak, is the poor performance of some contractors in implementing vital projects, which has negatively affected production capacity. He emphasized the prioritization of the lowest bidder over the most efficient one in the tendering process, leading to the reluctance of many international companies to participate in Kuwait Oil Company tenders.

In addition, Al-Barrak mentioned the lack of expertise within Kuwait Oil to implement and operate certain projects, such as those involving the enhancement of production through chemical injection and carbon dioxide gas. He also highlighted the need for compensation for Kuwait Oil due to the sudden halt of production by the Kuwait Gulf Oil Company in the divided zone from 2014 to 2020.

Lastly, Al-Barrak identified the effects of the COVID-19 pandemic as the seventh reason, leading to disruptions in business and global closures that impacted the supply chain for materials essential to maintaining production.

As the National Assembly approved a law exempting the Kuwait Advanced Manufacturing Industries Holding Company from the Central Agency for Public Tenders, Al-Barrak’s statements have raised questions about whether the Petroleum Corporation and its companies enjoy similar exemptions from routine agency procedures.

It is crucial for Kuwait to address these factors and take necessary steps to overcome the challenges faced in the oil sector. By streamlining project approval processes, prioritizing critical projects, and ensuring the selection of efficient contractors, Kuwait can work towards increasing its oil production and safeguarding its financial revenues.

Source: TimesKuwait

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