Powering Kuwait's Economy to 2035 and beyond
Kuwait at a Glance
National Currency: |
Kuwaiti Dinar (KWD) |
Country Population: |
4.5 million |
Exchange Rate on March 03, 2019: |
1 KWD = 3.2916 USD, 1 USD = 0.3038 KWD |
Type of Economy: |
High-income economy |
GDP (billions USD): |
152.37 |
GDP (Constant Prices, Annual % Change): |
4.1 |
GDP per Capita (USD): |
32,737 |
General Government Gross Debt (in % of GDP) : |
25.4 |
Unemployment Rate (% of the Labour Force) : |
1.1 |
Inflation Rate (%): |
3.0 |
Employment By Sector (in % of Total Employment): |
Agriculture (3.5), Industry (26.6), Services (69.8) |
Value Added (in % of GDP): |
Agriculture (0.5), Industry (55.9), Services (51.1) |
Source: IMF – World Economic Outlook Database, 2019, World Bank, Latest available data
Kuwait economy based on oil and gas
The Kuwaiti economy is heavily dependent on its oil and gas industry. Kuwait holds one of the largest reserves of oil and gas in the world, amounting to an estimated total of 101.5 billion barrels and is positioned in the top ten of the largest oil producers globally. The physical nature of its oil and gas reservoirs also means that, today, it enjoys some of the lowest costs of production of any oil province in the world. The country’s revenues from petroleum exports account for more than half of its GDP and 95% of government income.
However, the slump in global crude oil prices in the past few years has resulted in fiscal budget deficits for the first time in the country’s history. This has driven Kuwait's government to take remedial action and draw-up a long-term development plan. Dubbed the New Kuwait Vision 2035, this seven-pillar programme aims to secure the Arab country's future through economic diversification and sustainability.
Oil and gas sector strategy 2040 – Energy challenges
Despite these challenging economic conditions Kuwait’s oil and gas sector - led by its national oil company, Kuwait Petroleum Corporation (KPC) - remains key to the country’s economy and labour market. KPC has defined a strategy to invest $500bn by 2040 to pursue significant increases in hydrocarbon production.
This large portfolio of investments covers both the development of upstream infrastructure to raise Kuwait’s crude output capacity and downstream projects to increase the country’s share of the global petroleum and petrochemical product market.
The headline figures suggest an ambitious and aggressive ramp-up in production across KPC’s value chain: increasing domestic oil production to 4.75 million barrels per day, increasing domestic refinery throughput to 2 million barrels per day and almost tripling global petrochemical production to 16 million tons per year, all by 2040.
KPC’s strategy is responding to a number of global trends impacting the oil and gas industry, including a continued long-term global demand for crude; shift of oil demand from Europe to Asia; rising global demand for refined products, petrochemicals and natural gas; and the inevitable move towards renewable energy resources.
KPC 2040 Strategy Overview |
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Current |
2040 Targets |
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Upstream |
Domestic Oil Production Capacity Domestic Free Gas Production International Production |
3.15 mmbpd 0.2 bscfd 65 mboepd |
4.75 mmbpd 2.5 bscfd 150 mboepd |
Downstream |
Domestic Refining International Refining |
0.66 mmbpd 0.3 mmbpd |
2.0 mmbpd 1.3 mmbpd |
Petrochemicals |
Commodity Chemicals Derivatives & Specialities |
5.5 mmtpa 0.3 mmtpa |
16 mmtpa 1 JV by 2020 / 3 JVs by 2030 |
KPC and its subsidiary companies have translated this strategy into a number of major capital programs aimed at delivering on these growth targets, including:
Sustaining crude oil production from existing reservoirs through the application of new technology, such as Enhanced Oil Recovery
Development of free (non-associated) gas fields for clean power generation and petrochemical production
Development of new hydrocarbon resources such as heavy, offshore and unconventional fields
Construction of a new greenfield refinery in Kuwait with over 600 thousand barrels per day capacity to provide low-sulphur fuels to Kuwait’s power stations, which will also feature an integrated petrochemical complex
Upgrading existing refineries to produce cleaner products to serve domestic needs and which meet ever-tighter international fuels standards, such as Euro V
Construction of a Liquid Natural Gas (LNG) import facility to provide greater flexibility and security in meeting domestic power needs
Construction of an integrated refining and petrochemical complex in Vietnam to secure an outlet for Kuwaiti hydrocarbons and serve Asian markets
Applying renewable technology in the oil sector to reduce energy consumption, including a 1000 MW solar PV plant to meet 15% of the forecast energy demand of the oil sector by 2020 and upgrading office buildings to meet greener standards
Conclusions
Despite economic and environmental uncertainties, maintaining a strong oil and gas resource base and a leading cost position mean that Kuwait is positioning itself to be a major secure source of supply to meet long-term global hydrocarbon demands for years to come.
And while suppressed crude oil prices over the past few years have resulted in lower revenues and impact on its fiscal budget, the Kuwait government has signalled that it will continue to invest across its oil and gas sector, both domestically and internationally.
In order to deliver on its oil and gas ambitions, Kuwait must address the challenges of funding its massive capital programme; securing the skills, manpower and technology capabilities required to effectively build and operate its expanded portfolio; balance its role as a national employer and a global player in an already-competitive market; all the while demonstrating its commitment to sustainability and protection of the environment.
If Kuwait can rise to these challenges then, combined with the broader diversification strategies of the New Kuwait Vision 2035, a more powerful and sustainable economic combination can be achieved and the country will indeed secure its long-term economic prosperity and continued high standards of living to 2035 and beyond.
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