Kuwait to boost gas imports

Rising demand for electricity has prompted Kuwait to sign three multi-billion-dollar deals aimed at significantly boosting the country’s gas imports.

Kuwait has also begun rolling out several power plant construction projects as a further means of meeting growing energy requirements. Longer term, the country plans to target production of natural gas, which will enable it to keep its crude reserves for export.

The drive to boost gas imports took a key step forward in mid-May when the Kuwait Petroleum Corporation (KPC) signed a five-year liquefied natural gas (LNG) supply deal with BP worth an estimated $3bn. Just days previously, the state-run corporation sealed a six-year, $12bn LNG agreement with Royal Dutch Shell. Kuwait will also receive LNG supplies from Qatargas.

KPC told media that Kuwait was set to import up to 2.5m tonnes of LNG annually from the deals. The three suppliers will deliver 32 shipments per year between them, 18 of which will come from Shell. Qatargas will send eight shipments and BP six. In a separate move, Kuwait’s oil minister said in early June that the country was ready to sign an agreement with Iran to secure natural gas supplies, talking on the sidelines of a rare visit by Kuwait's emir to Iran.  

Domestic demand

Kuwait relies on both oil and natural gas to fuel its power and desalination plants, which consume an estimated 300,000 barrels of crude oil per day (bpd). The number is expected to increase to 900,000 bpd by 2030.

The state began importing LNG in June 2009, after signing a supply deal with Royal Dutch Shell. Another agreement, made with energy firm Vitol in April 2010, saw Kuwait supplied with LNG until 2013.

In 2011, Kuwait imported around 245m cu ft per day (cfd) of LNG, according to the most recent report of the US Energy Information Administration (EIA) published in 2013. Deliveries, which come mostly from Qatar and Nigeria, are made through the Mina Al Ahmadi GasPort regasification terminal, which has a total capacity of 500m cfd.

In a 2013 utilities sector report by independent ratings agency Capital Standards, Kuwait was found to have one of the highest rates of per capita energy consumption in the world. Annual electricity consumption grew by 20% between 2009 and 2013, according to the Ministry of Electricity and Water (MEW), increasing from 10,000 MW to 12,060 MW in 2013.  

Projects take shape

Kuwait has launched a number of projects aimed at meeting rising demand for electricity, led by the Az Zour North gas-fired integrated water and power plant (IWPP) initiative. The venture, the first public-private partnership (PPP) project in Kuwait, has secured $1.43bn in financing from the private sector. Once completed, it will include a 1500-MW power plant and a desalination facility with a capacity of 486,000 cu metres per day (cmd).

Az Zour North will be developed by a consortium made up of France’s GDF Suez, Sumitomo in Japan, and Kuwait’s AH Al Sagar and Brothers, which signed a deal to lead the project in December 2013. The consortium holds a 40% stake in the initiative, while the government will maintain a 10% share. The remaining 50% is slated to be distributed to citizens as free shares.

The plant is expected to eventually provide 12% of Kuwait’s installed power generation capacity and around 23% of its installed desalination capacity. Its output will be purchased by the MEW under a 40‐year long‐term energy conversion and water purchase agreement.

Under its PPP programme, the state also invited expressions of interest from the private sector for its planned Al Khairan gas- and oil-powered team-turbine power plant in December 2013, which will include a power and desalination plant with an initial capacity of 2500 MW.  

Domestic focus

In March 2014, the deputy CEO for gas and exploration at the Kuwait Oil Company, Menahi Al Enezi, said that the country hoped to increase production from current rates of 1.35bn cfd to 4bn cfd by 2030. However, efforts have been hindered by problems at the partitioned neutral zone, a hydrocarbon-rich region shared by Kuwait and Saudi Arabia.

Kuwait is also keen to up the focus on harnessing its natural gas reserves, which it recognises as representing a cheaper and cleaner alternative energy source. The state held an estimated 63trn cu ft of natural gas reserves at the end of 2012, according to the BP Statistical Review of World Energy 2013. However, less than 1% was being extracted annually, in part due to the technically-challenging fields in which the reserves are located.

With the cost of imports set to reach almost $20bn over the next five to six years, expansion of domestic production looks to be the most valuable long-term supply option for the state and its private partners.

Follow Oxford Business Group on Facebook, Google+ and Twitter for all the latest Economic News Updates. Or register to receive updates via email.

Read Next:

In Kuwait

Kuwait targets subsidy reforms

Plummeting oil prices have brought renewed calls for Kuwait to deepen its focus on diversifying its economy and reducing hydrocarbon dependency. 

In Energy

Maroc : Les financements étrangers donnent un coup de pouce aux...

Cet automne, le gouvernement du Maroc est parvenu à obtenir une enveloppe de 3.4 milliards de dollars auprès d’investisseurs étrangers afin de financer d’ambitieux projets énergétiques. Ces...

Latest

Qatar bets on Asia in petrochemicals expansion

Asia remains a key driver of growth for Qatar’s petrochemicals sector, with demand from the region fuelling investment and expansion projects. However, the long-term outlook is less certain after...