Kuwait Oil and Gas Report Q2 2010

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Kuwait Oil and Gas Report Q2 2010
Published on April 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 10.665% of supply. Regional oil use of 8.11mn 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 22.88mn b/d in 2001 and averaged an estimated 24.83mn b/d in 2009. It is set to rise to 27.19mn 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 of
14.77mn b/d. This had eased to an estimated 13.44mn b/d in 2009 and is forecast to reach 14.51mn b/d by 2014. Iraq has the
greatest production growth potential, followed by Qatar.
In terms of natural gas, the region consumed an estimated 404.6bn cubic metres (bcm) in 2009, with demand of 542.1bcm targeted
for 2014, representing 34.0% growth. Estimated production of 411.9bcm in 2009 should reach 655.4bcm in 2014 (+59.1%), which
implies net exports rising to 113.0bcm by the end of the period. Kuwait consumed an estimated 3.95% of the region's gas in 2009,
with its market share forecast at 5.04% by 2014. It contributed 3.32% to estimated 2009 regional gas production and by 2014 will
account for 2.95% of supply.
For 2009 as a whole, we have assumed an average OPEC basket price of US$60.70 per barrel (bbl), a 35.5% decline year-on-year
(y-o-y). 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 in 2011 and to US$90.00/bbl in 2012 and beyond.
In 2010, BMI is forecasting premium unleaded gasoline prices to average US$97.00, up from US$70.22/bbl in 2009. We are
assuming an average global jet fuel price for 2010 of US$97.58/bbl, compared with US$70.63 in 2009. For gasoil, the 2010 price
estimate is for an average of US$97.40/bbl, compared with US$70.50 in 2009. The FY10 naphtha price average, estimated at
US$81.58/bbl compares with US$59.07 in FY09.
Kuwait's real GDP is assumed by BMI to have fallen by 1% in 2009, compared with 7.7% growth in 2008. We are assuming average
annual growth of 2.9% 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 2.59mn b/d in 2009 to 2.90mn b/d in 2014, subject to OPEC quotas. Gas production should
reach 19.3bcm by 2014, up from an estimated 13.7bcm 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 8.0bcm.
Between 2009 and 2019, we are forecasting an increase in Kuwaiti oil production of 39.3%, with crude volumes rising steadily to
3.60mn 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 holds ninth place above only Saudi Arabia in BMI's updated Upstream Business Environment Ratings, which is a
surprising outcome in view of its vast oil and gas wealth. It is three points behind Bahrain and could only 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 Ratings, with a few high scores and near-term progress up the rankings a possibility. It is ranked ninth ahead only of
Iraq, thanks to excellent country risk factors that fail to counter the highly regulated and largely state-controlled industry. Bahrain is
just above it in the regional rankings, and may prove to be within Kuwait's reach over the next few quarters.

Kuwait Oil and Gas Report Q2 2010 Page 1/6


Table of Content

Executive Summary ...6
SWOT Analysis ...........8
Kuwait Political SWOT ............................... 8
Kuwait Economic SWOT ............................. 9
Kuwait Business Environment SWOT ....... 10
Kuwait Energy Market Overview ......11
Global Oil Market Outlook Q110 ......14
Not So Bleak Midwinter . 14
Oil Price Forecasts ........ 15
Global Oil Market Review Q409 .......16
Quarterly Trends ........... 18
Nigeria And Iraq Pose Problems ................... 18
Oil Supply, Demand And Price Outlook Q110 ................21
Table: Global Oil Consumption (000b/d) . 21
Short-Term Demand Outlook ......................... 22
Table: Global Oil Production (000b/d) ..... 24
Short-Term Supply Outlook ........................... 24
Longer-Term Supply And Demand ................. 25
Oil Price Assumptions .... 26
Table: Crude Price Assumptions 2010 ...... 26
Table: Oil Price Forecasts ........................ 26
Regional Energy Market Overview ..27
Oil Supply And Demand . 27
Table: Middle East Oil Consumption (000b/d) .............. 28
Table: Middle East Oil Production (000b/d) ................. 29
Oil: Downstream ........... 30
Table: Middle East Oil Refining Capacity (000b/d) ....... 30
Gas Supply And Demand ............................... 31
Table: Middle East Gas Consumption (bcm) ................. 31
Table: Middle East Gas Production (bcm) .................... 32
Liquefied Natural Gas .... 33
Table: Middle East LNG Exports/(Imports) (bcm) ......... 33
Business Environment Ranking ......34
Middle East Region ........ 34
Composite Scores ...... 34
Table: Regional Upstream Business Environment Rating ...................... 35
Table: Regional Downstream Business Environment Rating ................. 36
Upstream Scores ....... 36
Downstream Scores .. 37
Kuwait Upstream Rating ' Overview ........ 37
Kuwait Upstream Rating ' Potential Returns ................ 37
Kuwait Upstream Rating ' Risks To Potential Returns .. 37
Kuwait Downstream Rating ' Overview ... 38
Kuwait Downstream Rating ' Potential Returns ........... 38



Kuwait Downstream Rating ' Risks To Potential Returns ..................... 38
Business Environment ....................39
Legal Framework ........... 39
Infrastructure ............ 40
Labour Force ............ 40
Foreign Investment Policy ........................ 41
Tax Regime ............... 42
Security Risk ............. 43
Industry Forecast Scenario .............44
Oil And Gas Reserves .... 44
Oil Supply And Demand . 44
Gas Supply And Demand ............................... 45
Liquefied Natural Gas .... 46
Refining And Oil Products Trade ................... 46
Revenues/Import Costs ... 47
Table: Kuwait Oil And Gas ' Historical Data And Forecasts ................ 48
Other Energy ................. 49
Table: Kuwait Other Energy ' Historical Data And Forecasts .............. 50
Key Risks To BMI's Forecast Scenario .......... 50
Long-Term Oil And Gas Outlook ................... 50
Oil And Gas Infrastructure ...............51
Oil Refineries ................. 51
Service Stations .............. 52
Oil Storage Facilities ..... 52
Oil Terminals/Ports ....... 53
Oil Pipelines .................. 53
LNG Terminals .............. 53
Gas Pipelines ................. 53
Macroeconomic Outlook ..................55
Table: Kuwait ' Economic Activity ........... 57
Competitive Landscape ...................58
Executive Summary ... 58
Table: Key Players ' Kuwaiti Oil And Gas Sector ......... 58
Overview/State Role ....... 59
Licensing And Regulation ....................... 59
Government Policy ... 59
Licensing Rounds .... 59
International Energy Relations ............... 60
Table: Key Upstream Player ..................... 60
Table: Key Downstream Player ................ 60
Company Monitor .....61
Kuwait Petroleum Corporation (KPC) .......... 61
Kuwait National Petroleum Company (KNPC) ................... 65
Glossary Of Terms ...67
Oil And Gas Ratings: Revised Methodology ..................68
Introduction ................... 68
Ratings Overview ........... 68
Table: BMI Oil And Gas Business Environment Ratings: Structure ....... 69
Indicators ....................... 70
Table: BMI Oil And Gas Business Environment Upstream Ratings: Methodology ................. 70



Table: BMI Oil And Gas Business Environment Downstream Ratings: Methodology ............ 71
Oil And Gas Outlook: Long-Term Forecasts ..................73
Regional Oil Demand .... 73
Table: Middle East Oil Consumption (000b/d) .............. 73
Regional Oil Supply ....... 74
Table: Middle East Oil Production (000b/d) ................. 74
Regional Refining Capacity ........................... 75
Table: Middle East Oil Refining Capacity (000b/d) ....... 75
Regional Gas Demand ... 76
Table: Middle East Gas Consumption (bcm) ................. 76
Regional Gas Supply ...... 77
Table: Middle East Gas Production (bcm) .................... 77
Kuwait Country Overview .............................. 77
Methodology And Risks To Forecasts ............ 78
BMI Methodology .....79
How we generate our industry forecasts ........ 79
Energy Industry ............. 80
Cross Checks ................. 80
Sources .. 80



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