LNG

Kuwait, the Arabian Gulf state and LNG importer that was hit by power cuts in June as soaring temperatures pushed the electricity grid to its limits during peak operations, has made a huge oil and gas discovery in the Gulf to boost energy security.

Kuwait Oil Company (KOC) said on July 14 that had had made a “giant” oil discovery in the Al-Nokhatha field east of the Kuwaiti island of Failaka.

The discovery has estimated resources of 5.1 trillion standard cubic feet of natural gas and 2.1 billion barrels of light oil.

KOC said in a statement carried by the official Kuwait News Agency that the initial estimated area of the discovered well is around 96 square kilometres and estimated reserves were equivalent to the country's entire production over a period of three years.

LNG importer

Kuwait has been an LNG importer since 2009 to meet its increasing natural gas requirements for domestic demand and refinery operations.

The Gulf state previously used a floating storage and regasification unit (FSRU) at the port of Mina Al-Ahmadi, though since 2021 has an onshore LNG import terminal at Al-Zour with eight storage tanks and 1.8 million cubic metres of storage.

Kuwait stated that the initial findings on the oil and gas discovery “indicate huge potential to further enhance and increase hydrocarbon resource quantities in various layers and reservoirs” within the discovered field.

KOC stated that the marine area, representing about one-third of Kuwait's total land area and covering more than 6,000 square kilometres, in the first phase included drilling six exploratory wells for oil and gas. It added that subsequent stages would be determined based on the drilling results.

“The offshore exploration (Al-Nokhatha field) project is now a national endeavour with the goal of enhancing Kuwait's hydrocarbon reserves sustainability and meeting global demand to elevate Kuwait's status as a reliable global oil and gas producer,” KOC explained.

Seismic surveys

KOC added that the launch of the current marine exploration project was based on two-dimensional seismic surveys of the area, along with geophysical and geological studies.

“Additionally, the project will contribute to developing new technical skills in drilling and offshore production, creating varied employment opportunities for national talents,” it pointed out.

“Based on initial test results, a developmental plan will be established to commence actual production from the field at the earliest opportunity,” KOC stated.

KOC added that this discovery was the result of cohesive collaboration across its energy sector and the continuous support received from the state-owned principal  enery company and management of Kuwait Petroleum Corporation (KPC).

Kuwait’s Al-Zour LNG terminal is owned by KPC and has recently become a focus of the country’s domestic natural gas requirements.

Al-Zour has the capacity to import 22 million tonnes per annum of LNG for industrial and domestic use, though most recent annual imports have amounted to just over 6 million tonnes of LNG.

The onshore Al-Zour terminal, the largest in the Middle East, was constructed to provide fuel and power to Kuwait’s refining and petrochemicals industries located in and around Al-Zour.

Kent, the privately-owned international integrated energy services company headquartered in Dubai in the United Arab Emirates, has won a natural gas pipeline project contract to improve energy security for some of the smaller of the seven emirates that make up the UAE.

The Kent group, which is backed by private equity firm Bluewater, was named as the project management consultant (PMC) for the new pipeline in the northern UAE to supply RAKGAS.

RAKGAS is a state-owned energy business set up in 1984 in Ras Al Khaimah, transitioning from a gas company to a diverse energy provider.

Ras Al Khaimah is the largest city and capital of the emirate of Ras Al Khaimah.

It is the sixth-largest city in the UAE after Dubai, Abu Dhabi, Sharjah, Al Ain and Ajman.

Pipeline route

The pipeline will stretch from the Taweelah-Fujairah Gas Pipeline to Ras Al Khaimah with a connection to the Sajaa gas storage in the Sharjah emirate.   

The Taweelah-Fujairah link is an existing natural gas pipeline running for 244 kilometres (152 miles) in length from Taweelah in Abu Dhabi to Al Fujairah.

Kent will be responsible for coordinating efforts between RAKGAS and the front-end engineering and design (FEED) study contractor, ensuring that the project’s progression remains on target and aligned with its planned objectives.

“Collaborating with Kent on this project is a testament to our vision for energy supply in the region,” said RAKGAS Chief Executive Chris Wood.

“Their expertise and experience in the UAE will steer this project to success, ensuring we deliver on our commitments for energy security in Ras Al Khaimah,” Woods stated.

Partnership

Tush Doshi, Chief Operating Officer at Kent, said he was proud to partner with RAKGAS on this project.

“It will allow us to bring our world-class PMC delivery expertise to the Northern Emirates,” Doshi explained.

“We look forward to a long-lasting relationship with RAKGAS, as we ensure a continuous and seamless execution across leading energy projects in the region,” said the Kent COO.

Both Kent and RAKGAS added that they had adopted a “proactive approach” to addressing the region’s energy needs.

The Kent group is growing as a Middle East player. It gained some engineering traction in July 2021 when it completed the acquisition of the majority of the oil and gas division of Montreal, Canada-based engineers SNC-Lavalin.

Kuwait Integrated Petroleum Industries Co. (KIPIC) said all construction has formally been completed at the onshore LNG import terminal at Al-Zour, the largest in the Middle East, and constructed to provide fuel and power to the refining and petrochemicals industries.

A South Korean consortium comprising Hyundai Engineering Co., Hyundai Engineering & Construction Co. and Korea Gas Corp, also confirmed that the project had been executed.

The Hyundai-led consortium won the construction project valued at $2.9 billion back in 2016 from KIPIC, an affiliate of state-run Kuwait Petroleum Corp.

While the terminal was developed by KIPIC, it is owned by national oil and gas company KPC.

The Kuwait terminal is located about 90 kilometres southeast of Kuwait City and about 16km from Kuwait’s border with Saudi Arabia.

It consists of a regasification facility capable of liquefying 130,000 cubic metres of gas per day and eight LNG storage tanks, with four in the first phase, and each with 225,000 cubic metres of capacity.

A statement noted that Hyundai Engineering was in charge of the overall management of the project including design, licensing and the construction of core facilities.

Hyundai E&C was responsible for the building of the LNG storage tanks and reclamation of 7 million cubic metres of land from the sea.

Kogas, the owner of four LNG import terminals in South Korea, conducted test runs through July 2021 when the first commissioning cargo was delivered and since then has run operational training.

World-class facility

The Korean consortium said they shortened the construction period by more than six months even under the restrictions of the Covid-19 pandemic.

“Through the successful completion of this project, we have proved our world-class LNG plant construction and technological capabilities,” said a Hyundai Engineering statement.

Hyundai Engineering added that the LNG facility would provide the Middle East country with a stable gas network to respond to the rising call for energy diversification.

Kuwait already has a 15-year contract with QatarEnergy to buy 3 million tonnes per annum of LNG for the Al Zour facility.

Energy company KPC additionally plans to buy another 3.5 MTPA from the open market or through short-time contracts.

Until recently, Kuwait has imported LNG via a floating storage and regasification unit (FSRU) at the dockside of Kuwait’s Mina Al-Ahmadi port. The FSRU has been in operation since 2009.

Oil exporter Kuwait is also focussing on ramping up its own natural gas production as part of its economic growth strategy through to 2040.

The use of LNG in the Middle East is forecast to expand by around 50 percent through 2025, with most of the increase coming from Kuwaiti demand.

Kuwait’s domestic natural gas requirements are increasing in line with other Middle East nations and it is already receiving additional deliveries from suppliers such as the US exporters on the Gulf Coast of Louisiana and Texas.

The expansion in infrastructure comes as Kuwait and its neighbour, the United Arab Emirates, are listed 20th and 29th respectively in the list of 42 destinations for shipments from US exporters.

The Gulf Arab economies are among the world’s biggest oil consumers on a per capita basis, in part because of the heavy use of crude in their electricity grids.

Analysts note that the state of Kuwait, like the other Gulf Cooperation Council members, is embarking on an ambitious path of economic growth fuelled by more domestic natural gas use and less oil utilization.

Several of Kuwait’s neighbours are also trying to phase out oil from their power markets, including the UAE and Saudi Arabia. They are also turning to renewable projects and hydrogen development.

At the same time they must focus on building up their petrochemical and oil exports industries to monetize their resource heritage for the good of their citizens.