Al Ra'ai Kuwaiti Newspaper

7/2/2012

Two reasons make a long interview with Sami Al Rasheed, Chairman of the Kuwaiti Oil Company, the Managing Director, unusual. One reason is the man is very careful to go out of the technical context. He often says to his interviewer "let me be away from politics and disputes". The second reason is the company he heads is the store of the secrets of the Kuwaiti national wealth. Therefore, it is unexpected from the Chairman of the company that produce all the Kuwaiti oil, except the oil produced in the shared zone, to uncover a secret that has to do with the quantity of  the Kuwaiti strategic reserves, despite all the attempts done by foreign news agencies to lure him giving such information. The man is aware that all over Kuwait there are worrying rumors about the conditions of the Burgan oil field that produce the largest share of the Kuwaiti oil. Al Rasheed decided to uncover the condition of Burgan oilfield in a detailed manner through Kuwaiti newspaper "Al Ra'ai". Concisely, one would say that the field is still young with its three branches: Al Muqawa'a, Wara and Al Ahmadi, despite the fact that one of the reservoirs of the field needs water pumping in order to produce oil.

Al Rasheed talked in this interview about all the complex issues, and responded to the accusations and criticism directed to the Company. He demanded that any criticism should be on technical bases. Al Rasheed confirmed that "in the year 2020, the oil production of Kuwait will reach to 4 million barrels per day. 1.7 million barrels of it will come from the Burgan oilfield, one million barrels from the fields of the north, 500 000 barrels from the west fields, 350 000 barrels will be light oil together with gas and 300 000 barrels will be from the shared zone. The rest of the quantity will be completed with heavy oil from the lower Fares oilfield. In this way, Kuwait Oil Company will slightly exceed the targeted production capacity by the year 2020.

Al Rasheed mentioned the challenges the Company faced in the gas sector, particularly in exploration and production. He considered the lack of the first experimental readings to have a huge impact on the following production activities. He also explained that since the discovery of gas in 2006, an ambitious plan of production that was based on risk reduction was put forward. This ambitious plan was in a race against time to produce one billion cubic feet of gas by the year 2016, and to reach to the peak of production in 10 years instead of 20 years, in accordance with a production plan that has three phases, starting from the year 2006, which actually constituted four phases.

Al Rasheed pointed out that the Company is right now preparing to build three collection centers in the north. He uncovered that the maximum production capacity of Kuwait is between 3.2 to 3.3 million barrels per day. Out of this, the Company produces three million barrels, in addition to the 200 000 to 300 000 barrels that come from the shared zone. Despite that the strategic plan of Kuwait was to produce three million barrels per day in the year 2010, we in the Company could reach this rate without the share of Kuwait from the shared zone.

Here is the text of the interview:

• Why is Kuwait Oil Company accused not to fulfill the strategy of gas until today?

- Kuwait Oil Company works according to specific strategies and plans that guide our work, and consider them as our road map to reach to our goals. To get acquainted to what we have achieved and what we failed to achieve, we should explain that since the discovery of gas in 2006, an ambitious plan of production was put forward. It was based on risk reduction. Despite the difficulties encountered in production and exploration, because developing the newly discovered reservoirs normally requires 20 years, it is known that the oil sector, particularly in exploration and production, is dependent on risk reduction. We do not go and build huge constructions of production in order to develop certain reservoirs that need to go through different phases starting from exploration, specifying the dimensions of the reservoirs itself and then produce. All these require putting forward a plan to decide from where the production shall start, in order to guarantee a maximum extraction from the reservoirs. Therefore, this activity goes through a long process and this is its beginning.

- Concerning the discovery of gas in 2006, an ambitious plan based on risk reduction was put forward. We were short in time in aiming to produce one billion cubic feet by the year 2016. That means reaching the peak of production within the realm of 10 years instead of 20 years. Cutting the time to half was a big challenge. The plan was also based on three phases starting from the year 2006, which was in reality four phases.

• What are these phases? And where did the Company reach?

- In the natural gas sector: there is an achievement and that is to reduce the amount of the burned gas. This was compensated practically in the process of gas production. When we compare the amount of gas that was burned and now is used, it exceeded 40 million cubic feet. The spared amount of the burned gas is increasing every year. The burned amount of the gas in 2006 was 10% of the total quantity, and it is reduced now to 1.5 % (i.e. the spared quantity is estimated to be around 90 million cubic feet).

- In crude oil: Kuwait Oil Company succeeded in achieving the demanded quantity in the production crude oil. The production of the Company reached to 50 000 barrels and exceeded this amount in producing light crude oil. But, unfortunately, some concentrate only on the produced quantity of gas, without taking in consideration what has been achieved in reality. Despite all the odds we encountered, what has been achieved is not far from what we have been targeting to. The studies were based on primary reports due to the lack of compatibility of the data in the following phases with the phase that the production plans were based on. Imagine what would happen if we aimed from the beginning to produce one billion cubic feet. We would have put huge amounts of money and we would be now in the position of correcting all this. The plan was gradual from the very beginning in order to reduce the risks. There were also many other challenges that faced us. One of them is the difficulties we encountered in the reservoirs. It is the first time for us in Kuwait to deal with such difficulties, concerning the depth of these reservoirs that is between 14 000-18 000 feet. It is very deep. Our production has always been from the depth of 7000-10 000 feet. The second difficulty was the high pressure, the third was the high-temperature and the fourth was the proportion of toxic sulfide hydrogen that needs to be carefully handled. The fifth challenge was the nature of the "cracked" rocks that need to be drilled in order to get the best production. All these conditions put together make the reservoirs one of the most difficult, and need to be carefully treated and with high technology.

- We are in an urgent need for gas and the state needs it. The other aspect of it is that we need to fasten the productivity in order to achieve the strategy of the state. Despite all this, we were fast in achieving the targeted plan as far as possible to produce in 2008, and corrected our path to reach to 600 million cubic feet in 2013/2014, and to reach to one billion cubic feet in 2015/2016.

- When it comes to the economic aspects, if this gas is used in electrical stations, it will free the liquid oil products. Particularly crude oil. If we, for instance substitute 50,000 barrels per day of crude oil by gas in the electrical stations , so the 50 000 bpd of the crude oil will be exported as well as diesel and fuel with a higher value .

- With the urgent need and the enhancement of gas economy, we found that the best solution is to seek help from those who own better experience than ours in this field, and dealt with reservoirs similar to these ones, and the needed technology which represents a challenge in itself. So drilling one well, for example, requires six months. But for a company that has expertise and technology, the well can be drilled in three months, which means sparing 50% of the time. Even, with a very careful assumption, if the spared time is one month, you can calculate the difference materially and economically.

Heavy oil:

- We have two cases in the north. The first case is the four fields that the project of the north was all about for many years. The goal was to produce 900 000 bpd, but this project was stopped. We are working now to develop these fields, and the goal is to produce one million barrels per day of the medium Kuwait oil by 2020.

- The second case is the lower Fares oilfield that is in the northern west of Kuwait and produces heavy oil. This reservoir was discovered in the sixties. It is time now to develop our expertise in this field, because we are going to need to increase our productivity to four million barrels. We do not want to develop it with a pilot experiment that may give inaccurate results .We thought it would be better to take a reasonable quantity that was specified with 60 000 bpd in the beginning by the years 2015–2016. Thereafter the productivity will gradually increase until we reach to 270 000 bpd by the year 2030.

- Despite the fact that this reservoir was discovered since a long time, but it was not developed due to the high cost of the heavy oil projects. The main ideas with the lower Fares oilfield are to complete the rest of quantity from the strategy of 2020, reaching to the production of four million barrels per day.

• What is new in discussing the developments of the fields of the north and the reservoirs?

- Immediately after discussing the strategy of 2020, and the production reaching to four million barrels, the need to develop the reservoir (lower Fares) in the north became obvious. Just for the sake of confirmation, this field is not included in the four oilfields in the north that were specified according to the project of the fields of the north.

- In the beginning, the discussion was about the production from the (lower Fares) oilfield around 700 000 bpd. But after the discovery of gas and putting forward an ambitions plan for gas production and the light oil that joins gas production, the production plan of the company was amended. An ambitions plan was put forward to raise the production of gas to one billion cubic feet in the year 2016.

• What is the relationship between gas production with the production of heavy oil?

- Things should be clear. The road map draws for us the path we must follow. It is renewed every five years. According to the strategy of the institution and the Company, the production of light oil that joins the production of gas starts with producing 50 000 bpd, in the first phase of gas production. In the second phase, the production of oil comes up to 200 000 bpd. But in the third phase, i.e. in the year 2020, the production of the light oil will reach to 350 000 bpd. That means, we are going to reach half of the quantity that is produced in the (lower Fares) oilfield.

- Therefore, we will be able to produce 350 000 bpd of heavy oil in this field, instead of 700 000 bpd in meanwhile the production of heavy oil is increasing. The main idea was, in particular, to produce from this field in order to complete the rest of the quantity of the four million barrels per day by the year 2020.

Burgan oilfield:

• What are the natural components of big Burgan oilfield?

- (Big Burgan) is considered to be the second largest oilfield in the world, immediately after the Saudi Ghawar field. The nature of the porous rocks in the field makes the production easy and this is considered as a great advantage. Big Burgan consists of three oilfields; the first one is Wara, the second is Al Muqawa’a and the third is Al Ahmadi. All these fields are in a very good condition and consist of 1000 wells.

• Talking about the production from Burgan oilfield raises always a question: what is its production capacity?

- Burgan in general is still young. It is good for all to know that we are very keen to preserve it. Burgan1 is a productive field since 1938 and until today, that made it to a shrine visited by foreigners and experts. Despite the fact that all reservoirs decrease in their production capacities, but we, thanks to God, could increase its production capacity. The recent studies confirm its capacity to give and produce for a long period.

• Despite these facts, there are rumors about the decrease in the capacity of Burgan oilfield. How do you look at that?

- It is not correct, technically, to talk about decrease in Burgan oilfield. You should know that the reservoir goes through three phases. The first phase is that the production comes from the reservoir itself in a natural way. The second goes through water pumping to help the production, and the third phase is through using Enhanced Oil Recovery (EOR), whether using gas or chemicals, or using other means of extracting oil that are well-known, and used to promote productivity.

The most important projects:

• What are the most important projects in Kuwait Oil Company?

- Right now, we are preparing three collection centers in the north within our plan to reach to the production of one million bpd. It is also needed a collection center concerning the heavy oil and its derivatives. We have also a project to separate oils for the first time in Kuwait. We will be able to produce three kinds of oil, light, medium and heavy. We will be able too to mix them due to the upcoming market demands. All these are part of our future planning according to the strategies of the institution and the Company.

• What is the present production capacity of the Company?

- Our maximum capacity in the Company is three million barrels from the oil of Kuwait, in addition to 200 000-300 000 bpd from the shared zone. That means we are talking about 3.2-3.3 million bpd. Despite the strategic plan of Kuwait was to produce three million barrels per day in the year 2010, but we in the Company could reach this rate without the share of Kuwait from the shared zone.

• What does it mean to say that the Company has exceeded the specified production capacity in its strategy?

- It is an achievement to override the specified production capacity as it is stated in the strategy in all aspects. We are racing against time. Developing our production capacity gave us the possibility that enabled us today to benefit from this capacity whenever needed. We are also very near to achieve our strategy in 2015 to reach to 3.5 million bpd, from which the share of Kuwaiti oil is 3.2 bpd.

• How do you interpret your success in fulfilling the strategy of oil and the fail in fulfilling the strategy of gas?

- When it comes to crude oil, we achieved success, and it is a reality now. The State will benefit from this energy in the prevailing political events, and the international high prices. Two things benefit Kuwait i.e. demand and prices. Concerning gas production the reasons were explained in a previous question.