KPC aims to increase the production capacity of crude oil to 4.75 million barrels by 2040. How will it ensure sustainable production while reducing the cost per barrel?
KPC's 2040 strategy identified several production initiatives that will help KPC reach its target and sustain production levels. Cost efficiency through reduction of cost per barrel is definitely challenging, especially when most of the increase in the production capacities are related to the development of more complex oil types using EOR, new oil and gas, heavy oil, offshore, and unconventional oil. Therefore, utilizing the latest technology in drilling, well completion, and oil and gas production will play a pivotal role in achieving the 2040 target. Currently, KPC is implementing a number of short and long-term business improvement initiatives to ensure a sustainable production while managing and optimizing the cost per barrel, such as utilizing optimum materials and equipment, renegotiating service and maintenance contracts, and utilizing technology to promote innovative cost-reduction measures.
How will KPC reach its objective to increase its natural gas production capacity by 2 billion scft per day between 2020 and 2040, and why is it important for KPC to grow the natural gas production capacity?
Natural gas has always been a major factor of Kuwait's economy as the country has a long history of natural gas exploration and processing. That goes back to 1979, when Kuwait's first gas processing complex was commissioned at Mina Al-Ahmadi Refinery—KNPC. Furthermore, the development of Kuwait's gas industry continues to reach around 2 billion scft per day of rich gas production today. According to our recent forecast, our future outlook for the rich gas development will be exposed to a great expansion in the near future, when North Kuwait Jurassic fields become fully operational by the year 2023/2024, adding to the total rich gas production of Kuwait. In that regard, and to increase the natural gas production capacity, KPC has invested in few projects, such as building three Jurassic Production Facilities (JPFs) at a capacity of 120 million scft per day each, to produce free gas from North Kuwait. Those were commissioned last year. In addition, four additional JPFs are planned to be constructed and commissioned between 2022 and 2024. In addition, KPC is pursuing viable investment opportunities outside of Kuwait where economically feasible to increase KPC's portfolio of gas production and validate their applicability to be imported to Kuwait.
In what ways will KPC maximize its financial efficiency and reduce its cost within its new strategic plan?
The challenges ahead are substantial, and the oil recovery will be costlier than what it is today. To maximize its financial efficiency and reduce its cost within its new strategic plan, KPC is pursuing different initiatives. We are expanding and integrating through the value chain in order to enhance long-term revenues, consequently boosting operational excellence. We also aim to increase energy efficiency in operations and utilize technology especially in areas of significant savings such as advanced drilling and well maintenance. Finally, it will be paramount to have an effective allocation and management of capital as well as divesting non-profitable businesses (e.g. fertilizer plants).
How will KPC finance its capital program under its 2018/2023 plan?
For financing the capital programs during 2019/2023 period, KPC is considering pursuing an optimal external financing option for some of the major projects to liberate cash flow and improve project economics.
What are your expectations for the year ahead?
Our target is to continue our focus on implementing our short-term plan covering the full supply chain from production of oil and gas, refining and petrochemicals, securing supply of fuel to meet domestic fuel demand, securing supply for our international customers, and increasing our market share in potential international markets. In addition, we are closely monitoring the execution of the ongoing projects to ensure their timely completion and commissioning of the approved capital projects to achieve our targets.