State-run Kuwait Oil Company (KOC) has signed a five-year service contract with Royal Dutch Shell to develop pure gas fields in the north of the country.
The deal with Shell will see output increased from gas fields not associated with oil output, according to a spokesman for the Kuwait oil sector, which is designed to help decrease the exposure of domestic gas supply to OPEC output agreements on oil.
Power generation and industry have caused gas demand in Kuwait, the worldÔÇÖs fourth-largest oil exporter, to soar to a point where it has now outstripped supply, forcing the state to import liquefied natural gas (LNG).
The problem has been made worse by Kuwait's adherence to OPECÔÇÖs oil output restrictions since late 2008. Most of Kuwait's gas is a byproduct of oil production, so when it pumps less crude, it pumps less gas.
It is understood that Kuwait plans to increase output from the gas fields to one billion cubic feet per day, from around 140 million cubic feet per day.
Kuwait had hoped to bring production up to 175 million cubic feet per day by now, but has not had the necessary knowledge or technology to achieve this.
Shell will be providing the expertise and technology needed to produce from the technically challenging fields, which are characterised by unconventional geological formations, difficult reservoir conditions and complex gas compositions.
"This agreement reinforces our long-term commitment to the State of Kuwait", said Malcolm Brinded, executive director of ShellÔÇÖs Upstream International division, commenting on the deal. "We will bring to bear our experience which we have gained developing the most challenging gas resources around the globe including sour and tight gas."
"The development of the Jurassic Gas fields is complex," said Sami Fahad Al-Rushaid, chairman and managing director of KOC. "We believe that KOC resources combined with Shell's expertise will maximize production from the Jurassic Gas fields."
More gas output from pure fields would help Kuwait to meet demand for clean energy for power generation, oil industry operations and petrochemical plants.
KOC and Shell, who have been negotiating a gas service contract for years, declined to give details of the dealÔÇÖs value, although it is thought to be in the region of $700 million (Ôé¼516 million).
For several years, Kuwait has also been negotiating a service agreement with the US oil major Exxon Mobil to boost heavy oil output, but has yet to agree a final deal.
