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Printable versionNov.
10 (Bloomberg) -- Kuwaiti oil production from the world's
second-largest field is ``exhausted'' and falling after almost six
decades of pumping, forcing the government to increase spending on new
deposits, the chairman of the state oil company said.
The plateau in output from the Burgan field will be about 1.7
million barrels a day, rather than as much as the 2 million a day that
engineers had forecast could be maintained for the rest of the field's
30 to 40 years of life, said Farouk al-Zanki, the chairman of
state-owned Kuwait Oil Co. Kuwait will spend about $3 billion a year
for the next three years to expand output and exports, three times the
recent average.
To boost oil supplies, ``Burgan by itself won't be enough because
we've exhausted that, with its production capability now much lower
than what it used to be,'' al-Zanki said during an interview in his
office in Ahmadi, 20 kilometers south of Kuwait City. ``We tried 2
million barrels a day, we tried 1.9 million, but 1.7 million is the
optimum rate for the facilities and for economics.''
Persian Gulf oil producers, which supply about a fifth of world
demand, are rushing to find new reserves and build more pipelines and
export terminals to compensate for declining output from older
reservoirs. Any delay in replacing supplies may push oil prices higher
and slow economic growth, the International Energy Agency said in a
report this week.
To be sure, the plateau in supply if achieved would be higher than
a projection from the IEA. This week the Paris-based group said output
from the Greater Burgan area will increase from 1.35 million barrels a
day in 2004 to 1.64 million a day in 2020, before falling to 1.53
million a day in 2030. The field now pumps between 1.3 million and 1.7
million barrels a day, al-Zanki said.
Sustainable Supply?
The debate over the sustainability of Middle East oil supplies has
gained pace this year, after investment banker Matthew Simmons
published ``Twilight in the Desert: The Coming Saudi Oil Shock and the
World Economy.'' In the book, he asserted the practice of injecting
water into Saudi fields may lead to rapid production declines. Saudi
officials rejected the charge.
Brought into production in 1948, Burgan accounts for more than
half of Kuwait's 96.5 billion barrels of oil reserves, or 55 billion
barrels. Only Saudi Arabia's Ghawar oilfield, about 500 kilometers (313
miles) to the south, is bigger.
Benchmark New York oil futures have tripled in price during the last
four years to a record $70.85 on Aug. 30 because countries such as
Kuwait and Saudi Arabia haven't invested enough in expanding production
capacity to keep pace with faster-than- expected demand from countries
such as China, India and the U.S.
Kuwait last month pumped 2.5 million barrels a day, equivalent to 3
percent of global demand, according to Bloomberg data. That's down from
a peak of almost 3 million barrels a day in 1972, according the Arab
Oil & Gas directory.
``Kuwait's oil industry requires significant investment and needs
international oil companies to help kick-start production capacity
increases,'' Colin Lothian, senior Middle East energy analyst at Wood
MacKenzie Ltd., an Edinburgh-based oil industry consultant, said in a
telephone interview.
Burgan on its own had enough reserves to support 2 million or 3 million
barrels of daily output, but those have already been produced, al-Zanki
said in the interview two days ago. The reserves are declining and need
to supplemented with other reservoirs, he said.
Revival Targeted
The family-ruled emirate plans to increase production capacity
by about 18 percent to 3 million barrels a day by the end of the decade
from about 2.55 million now, and to at least 4 million by 2020.
Oil consumers will be more reliant on Middle Eastern supplies in
coming years and vulnerable to higher prices and slower economic growth
should investments be delayed, the IEA, an adviser to 26 consuming
nations, said in an annual outlook released on Nov. 7.
Petrofac Ltd. and rivals SK Engineering & Construction Co. won two
contracts worth in more than $1.6 billion this year to upgrade and
refurbish 20 plants that separate natural gas from oil ready for export
in northwestern Kuwait. That works is in preparation to allow
international oil companies to develop four oil fields near the border
with Iraq.
``You need to develop more reserves in order to support the future
target,'' said al-Zanki, who was appointed Kuwait Oil's chairman last
year. Kuwait Oil is the country's state-owned monopoly oil and gas
producer.
In a 10-year-old plan known as Project Kuwait, the emirate may invite
companies such as Exxon Mobil Corp., Royal Dutch Shell Plc and BP Plc
to invest about $8.5 billion to almost double output at the emirate's
northern fields to 900,000 barrels a day by 2025. The project would be
the first time since the 1970s that foreign companies operate Kuwaiti
oilfields.
Crude oil for December delivery fell as much as 57 cents, or 0.97
percent, to $58.36 a barrel on the New York Mercantile Exchange today,
after an Energy Department report yesterday showed U.S. stockpiles of
crude were at their larges since July. Crude traded at $58.61, down 32
cents, at 10:45 a.m. in London.
--Editor: Evers (tjc, ldk)
Story illustration: {ETOP } for top energy news. For more Middle East
stories see {NI MIDEAST BN }. For a graph of New York crude-oil prices
over the past year, see {CL1 GP D }. To graph Kuwaiti oil production
during the past 40 years, see {OPCRKUWA GP Y }
To contact the reporter responsible for this story: James Cordahi in Kuwait City (971) (50) 655 0476 or at cherifcord@bloomberg.net Andy Critchlow in Dubai on (+971) (4) 352 2116 or at acritchlow1@bloomberg.net
To contact the editor responsible for this story: Tim Coulter in London on (44) (20) 7330 7901 or at tcoulter@bloomberg.net
~~~~~~~~~~~~~~~ Editorial Notes ~~~~~~~~~~~~~~~~~~~
Thanks
to our friends at Global Public Media for tracking this article down,
which is now unavailable except at the Bloomberg website. This version
is an update of others which have been reposted elsewhere on the net.
-AF
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Original article available here.
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Published on 9 Nov 2005 by Bloomberg. Archived on 15 Nov 2005. Kuwait Oil Field, World's Second Largest, 'Exhausted'by James Cordahi and Andy Critchlow FAIR USE NOTICE: |
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