The latest Kuwait Oil & Gas Report from BMI forecasts that the country will account for 2.68% of Middle East (ME) regional oil demand by 2014, while providing 10.65% of supply. Regional oil use of 8.24mn barrels per day (b/d) in 2001 rose to an estimated 11.38mn b/d in 2009. It should average 11.66mn b/d in 2010 and then rise to around 12.68mn b/d by 2014. Regional oil production was 22.87mn b/d in 2001 and in 2009 averaged an estimated 24.79mn b/d. It is set to rise to 28.65mn b/d by 2014. 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 fallen to an estimated 13.41mn b/d in 2009, but is forecast to reach 15.96mn b/d by 2014. Iraq has the greatest production growth potential, followed by Qatar. In terms of natural gas, the region consumed an estimated 406.5bn cubic metres (bcm) in 2009, with demand of 545.1bcm targeted for 2014, representing 34.1% growth. Estimated production of 420.6bcm in 2009 should reach 652.8bcm in 2014 (+55.2%), which implies net exports rising to 108bcm by the end of the period. Kuwait consumed an estimated 3.94% of the region's gas in 2009, with its market share forecast at 5.01% by 2014. It contributed 3.17% to estimated 2009 regional gas production and by 2014 will account for 3.06% of supply. For 2009 as a whole, we have assumed an average OPEC basket price of US$59.00 per barrel (bbl), a 37.3% decline year-on-year (y-o-y). This represents an upgrade from the US$55.00/bbl forecast we were using in the previous quarter. For 2010, we expect to see a significant oil price recovery to US$83.00/bbl for the OPEC basket price, gaining further ground to US$85.00/bbl in 2011 and to US$90.00/bbl in 2012 and beyond. For 2009, BMI has assumed a global average gasoline price of US$67.46/bbl, with the fuel having peaked in June at almost US$80.00/bbl. The overall y-o-y fall in 2009 gasoline prices is put at 33.7%. The BMI gasoil forecast is for an average price of US$70.59/bbl, assuming a monthly high above US$94/bbl in December 2009. The full-year outturn represents a 41.8% y-o-y fall. The annual jet price level for 2009 is estimated at US$68.45/bbl. This compares with US$124.95/bbl in 2008. The 2009 average naphtha price is put by BMI at US$52.66/bbl, down 39.7% from the previous year's level. Kuwait's real GDP is estimated by BMI to have fallen by 2.2% in 2009, compared with 6.2% growth in 2008. We are assuming average annual growth of 3.1% in 2010-2014. We expect oil demand to rise from an estimated 303,000b/d in 2009 to 339,000b/d in 2014, 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 an estimated 2.78mn b/d in 2009 to 2.90mn b/d in 2014, subject to OPEC quotas. Gas production should reach 20.0bcm by 2014, up from an estimated 13.3bcm in 2009. Consumption is expected to rise from an estimated 16.0bcm to 27.3bcm by the end of the forecast period, requiring imports of 7.3bcm. Between 2009 and 2019, we are forecasting an increase in Kuwaiti oil production of 45.1%, with crude volumes rising steadily to 3.65mn b/d by the end of the 10-year forecast period. Oil consumption between 2009 and 2019 is set to increase by 33.0%, with growth slowing to an assumed 3.0% per annum towards the end of the period and the country using 403,000b/d by 2019. Gas production is expected to climb to almost 27bcm by the end of the period. With 2009-2019 demand growth of 167.6%, this provides an import requirement rising to more than 16bcm by 2019. Details of the BMI 10-year forecasts can be found in the appendix to this report. Kuwait now shares seventh place with Israel in BMI's updated Upstream Business Environment rating, which is a surprising outcome in view of its vast oil

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Kuwait Oil and Gas Report Q1 2010
Published on January 2010
Report Summary
The latest Kuwait Oil & Gas Report from BMI forecasts that the country will account for 2.68% of Middle East (ME) regional oil
demand by 2014, while providing 10.65% of supply. Regional oil use of 8.24mn barrels per day (b/d) in 2001 rose to an estimated
11.38mn b/d in 2009. It should average 11.66mn b/d in 2010 and then rise to around 12.68mn b/d by 2014. Regional oil production
was 22.87mn b/d in 2001 and in 2009 averaged an estimated 24.79mn b/d. It is set to rise to 28.65mn b/d by 2014. 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 fallen to an estimated 13.41mn b/d in 2009, but is forecast to reach 15.96mn b/d by 2014. Iraq has the
greatest production growth potential, followed by Qatar.
In terms of natural gas, the region consumed an estimated 406.5bn cubic metres (bcm) in 2009, with demand of 545.1bcm targeted
for 2014, representing 34.1% growth. Estimated production of 420.6bcm in 2009 should reach 652.8bcm in 2014 (+55.2%), which
implies net exports rising to 108bcm by the end of the period. Kuwait consumed an estimated 3.94% of the region's gas in 2009, with
its market share forecast at 5.01% by 2014. It contributed 3.17% to estimated 2009 regional gas production and by 2014 will account
for 3.06% of supply.
For 2009 as a whole, we have assumed an average OPEC basket price of US$59.00 per barrel (bbl), a 37.3% decline year-on-year
(y-o-y). This represents an upgrade from the US$55.00/bbl forecast we were using in the previous quarter. For 2010, we expect to
see a significant oil price recovery to US$83.00/bbl for the OPEC basket price, gaining further ground to US$85.00/bbl in 2011 and to
US$90.00/bbl in 2012 and beyond.
For 2009, BMI has assumed a global average gasoline price of US$67.46/bbl, with the fuel having peaked in June at almost
US$80.00/bbl. The overall y-o-y fall in 2009 gasoline prices is put at 33.7%. The BMI gasoil forecast is for an average price of
US$70.59/bbl, assuming a monthly high above US$94/bbl in December 2009. The full-year outturn represents a 41.8% y-o-y fall. The
annual jet price level for 2009 is estimated at US$68.45/bbl. This compares with US$124.95/bbl in 2008. The 2009 average naphtha
price is put by BMI at US$52.66/bbl, down 39.7% from the previous year's level. Kuwait's real GDP is estimated by BMI to have fallen
by 2.2% in 2009, compared with 6.2% growth in 2008. We are assuming average annual growth of 3.1% in 2010-2014. We expect oil
demand to rise from an estimated 303,000b/d in 2009 to 339,000b/d in 2014, 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 an estimated 2.78mn b/d in
2009 to 2.90mn b/d in 2014, subject to OPEC quotas. Gas production should reach 20.0bcm by 2014, up from an estimated 13.3bcm
in 2009. Consumption is expected to rise from an estimated 16.0bcm to 27.3bcm by the end of the forecast period, requiring imports
of 7.3bcm.
Between 2009 and 2019, we are forecasting an increase in Kuwaiti oil production of 45.1%, with crude volumes rising steadily to
3.65mn b/d by the end of the 10-year forecast period. Oil consumption between 2009 and 2019 is set to increase by 33.0%, with
growth slowing to an assumed 3.0% per annum towards the end of the period and the country using 403,000b/d by 2019. Gas
production is expected to climb to almost 27bcm by the end of the period. With 2009-2019 demand growth of 167.6%, this provides
an import requirement rising to more than 16bcm by 2019. Details of the BMI 10-year forecasts can be found in the appendix to this
report.
Kuwait now shares seventh place with Israel 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 point behind Oman and could mount a challenge if its competitive landscape were
to improve. 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 equal seventh alongside Oman, thanks largely to excellent country
risk factors that outweigh a highly regulated and largely state-controlled industry. Iraq and Bahrain are below it in the regional
Kuwait Oil and Gas Report Q1 2010 Page 1/5

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rankings, but are unlikely to pose much of a threat over the next few quarters.
Table of Content
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
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
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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
Kuwait ' Economic Activity ......... 38
Competitive Landscape .....39
Executive Summary ......... 39
Table: Key Players ' Kuwaiti Oil & Gas Sector . 39
Overview/State Role ............. 40
Table: Key Upstream Player ........ 42
Table: Key Downstream Player ... 42
Company Monitor .......43
Kuwait Petroleum Corporation (KPC) ..... 43
Kuwait National Petroleum Company (KNPC) ........ 47
Glossary of Terms ......49
Oil & Gas Ratings: Revised Methodology ....50
Introduction .. 50
Ratings Overview .. 50
Table: BMI Oil & Gas Business Environment Ratings: Structure ........... 51
Indicators ...... 52
Table: BMI Oil & Gas Business Environment Upstream Ratings: Methodology .. 52
Table: BMI Oil & Gas Business Environment Downstream Ratings: Methodology ..... 53
Oil & Gas Outlook: Long-Term Forecasts ....55
Regional Oil Demand .......... 55
Table: Middle East Oil Consumption (000b/d) ... 55
Regional Oil Supply ............. 56
Table: Middle East Oil Production (000b/d) ...... 56
Regional Refining Capacity . 57
Table: Middle East Oil Refining Capacity (000b/d) ......... 57
Regional Gas Demand ......... 58
Table: Middle East Gas Consumption (bcm) ...... 58
Regional Gas Supply ............ 59
Table: Middle East Gas Production (bcm) ......... 59
Kuwait Country Overview .... 59
Methodology & Risks To Forecasts .. 60
BMI Forecast Modelling .....61
How we generate our industry forecasts ... 61
Energy Industry .... 62
Cross Checks 62
Sources ......... 62
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