Industry News

Kuwait’s oil minister says market will balance by end-March 2018

Kuwait’s oil minister says market will balance by end-March 2018

The world oil market is taking longer than expected to rebalance but the glut should go by the end of March and OPEC need not take further action to curb supplies for now, Kuwait’s oil minister said.

Essam al-Marzouq also told Reuters there was no need for the Organization of the Petroleum Exporting Countries to hold an extraordinary meeting before its scheduled gathering in November because OPEC-led supply cuts were “working well”.

OPEC and 11 non-OPEC states have cut output by 1.8 million barrels per day (bpd) since January. The curbs, which were initially due to run for the first half of 2017, were extended to March 2018 in a bid to cut oversupply and lift prices.

“We are in the first two weeks of the extension period. It is too early to say now what I will do in November,” Marzouq said in an interview in the Kuwaiti capital, saying there was no need to deepen the cuts for now.

He said OPEC should “wait and see what happens, at least in the next couple of weeks until the end of July, to see the compliance data and the effect on the stocks.”

OPEC wants to bring inventories in industrialised states down from above 3 billion barrels to the five-year average of 2.7 billion. The International Energy Agency said stockpiles fell in May but remained 266 million barrels above the average.

Brent oil prices climbed above $58 a barrel in January from a 2016 low of about $27 a barrel, but persistent oversupply has driven it back below $50.

The minister said a big drawdown in global inventories had not been expected in the first half of 2017. “We have always been looking at the second half of the year,” he said, citing stronger demand in the U.S. summer driving season.

U.S. government data showed U.S. inventories in the week to July 7 fell by 7.6 million barrels, the biggest drop in 10 months and more than expected.

The minister said this showed the agreement to cut output had “started to have an impact.”

Adding to OPEC’s challenge, U.S. shale production has been rising and output from Nigeria and Libya, two OPEC states exempted from the agreement, has also climbed.

Even with higher Nigerian and Libyan production, Marzouq said OPEC output was still within the 32.5 million bpd target set under the global pact. “We are still within that range,” he said, putting average production for June for the 13 OPEC states that originally agreed on the deal at 32.4 million bpd.

A joint ministerial committee, known as the JMMC and headed by Kuwait, monitors compliance with the supply pact and meets in St Petersburg on July 24. At that gathering, Marzouq will meet counterparts from Saudi Arabia, Russia, Algeria, Venezuela and Oman.

The JMMC can make recommendations to OPEC and other oil producers to adjust the agreement, if necessary

Marzouq said it was too early to talk about recommendations to adjust the deal, or to cap production from Nigeria or Libya. “It is too early for that,” he said.

The Kuwaiti minister said oil prices had started to stabilise between $45 and $50 and said this was “what markets see now as a fair price”. But he said prices would get a boost in coming months as inventories fell.
Petrofac strengthens Iraq presence with contracts worth $100 million

LONDON -- Petrofac has secured a contract extension and a new award with a combined value of more than $100 million for construction management, engineering, commissioning and start-up services for two International Oil Companies (IOCs) in Iraq.

The awards reflect the extensive track record Petrofac has been amassing in the country since 2010. Today’s announcement builds upon $70 million of new awards in Iraq announced in April, giving the Group good visibility of future work in the country and securing around 250 jobs.
Source: www.worldoil.com


KIPIC – the newly-formed multi-activity oil company – Company requires foreign expertise

Kuwait Integrated Petroleum Industries Company (KIPIC) was established in November last year to handle various oil activities ranging from building new refineries and liquefied gas import facility and integrating the petrochemical unit in the refinery. The capital is estimated to be in the range of KD 6 billion ($18 billion). It will be under the umbrella of Kuwait Petroleum Corporation (KPC) and a part of the K companies.
It will be a heavy and challenging task for the company to complete and fulfill its objectives within four to five years, most importantly completing the Al-Zour Refinery with a production capacity of 620,000 barrels per day. This is for replacing the closed-down Shuaiba Refinery but with almost three times its capacity to meet the local demand for electricity and use the additional units to export finished products to the world.

The refinery will run on heavy Kuwaiti oils to ensure a profitable margin for this type of crude oil rather than selling it overseas at giveaway prices.

Establishment of the liquefied gas import facility could be an easier task to complete on time in line and made it environment-friendly. It could prove to be cheaper than utilizing our oil resource. It will also be cheaper to import gas in the long run, considering we are surrounded by gas-rich countries, or we could import shale gas from USA.

The petrochemical complex, as an addition to the refinery, is a must to improve the refinery economics and returns. However, KIPIC cannot run alone without a foreign partner. This is the truth that we have to face. Without huge expertise in the petrochemical field, Kuwait will neither expand and excel in this field nor find another source of income besides oil.

Frankly, we should have invited international companies in this huge challenging project to ensure success, smooth running of operation and, most importantly, completion on time. But alas, this will not be the case and we are bound to remain behind our neighboring oil companies.

We do trust in our national potential in running our industries, but new ideas, and new technology and knowhow from the masters of the industry will only add value and offer more eye-opening methods which we have been lacking since the nationalization of our industry in 1975.

Let’s bring back the good habits of the 1960s and private joint-venture companies.

email: naftikuwaiti@yahoo.com

By Kamel Al-Harami