KUWAIT CITY, Oct 12, (Agencies): Oil prices are likely to rise early next year amid signs of a decline in production of highcost crude and improved economic growth, Kuwait’s Oil Minister Ali Al-Omair said Monday. “There are signs that much of the highcost oil has started to exit the market and this will help improve prices,” Omair told reporters on the sidelines of the Kuwait Oil and Gas Conference.
There are indications that global economic growth will improve early in 2016, and this will also help boost oil prices, he said. His statements come amid a string of optimistic forecasts by the Organization of the Petroleum Exporting Countries. OPEC secretary-general Abdullah Al- Badri said in Kuwait Sunday that “OPEC is confident that it will see a more balanced market in 2016”.
He also said production from outside OPEC was declining and could contract next year, reducing much of the global market glut that has depressed prices. Qatar’s Energy Minister Mohammed bin Saleh al-Sada, who is acting OPEC President, also said on Sunday there were signs of an oil price rise next year, adding that the oil price has “bottomed out”. OPEC and non-OPEC producers are holding a technical meeting on Oct 21 to discuss the possibility of cutting production to boost prices.
But Al-Omair said that so far no specific recommendations have been made ahead of OPEC’s Dec 4 ministerial meeting. At its past two meetings, last November and June this year, OPEC maintained its production at 30 million barrels a day, Omair said. “As of now, there have been no calls for a big change to OPEC policy” at the next meeting, he added.
Ali Al-Omair has reaffirmed the country’s plan aiming to produce four million barrels per day by 2020. He said that huge efforts are being exerted to achieve this target, noting the oil sector is seeking to address big challenges. Asked about oil prices, the minister said that oil prices are determined by markets through supply and demand and the global economic growth. He said that the OPEC kept the output ceiling at 30 million barrels per day during meetings in November, 2014, and June, 2015. Kuwait’s contracts are not affected by oil prices, he said, stressing the continuation of the country’s production plan. “We are seeking to achieve our aims.
Today our production is about three million barrels per day,” he said, noting that the production will exceed three million during the first quarter of 2016. As for the influence of US decision regarding exporting oil to the global markets, he stated that the decision will not have any impact on the OPEC. On his part, CEO of Kuwait Petroleum Corporation Nizar Al-Adsani said in a similar statement that the US decision will only affect the light oil not the Gulf or heavy ones. He noted that Kuwait seeks to import gas from Iran and Iraq for operating electricity plants. He said that the Kuwait Oil Company signed this year a deal to establish three collection centers with a capacity of 100,000 barrels each, noting there are three facilities for the early production with a capacity of 18,000 barrels.
Al-Adsani underlined the importance of human resources in the area of industry, referring that the corporation seeks to train them for the new projects and technology. He pointed out that the oil sector needs up to 30,000 workers after the start of environmental fuel projects and Al-Zour refinery, and the expansion of drilling towers. He said that about KD 32 billion will be invested in the five-year plan. Meanwhile, Kuwait’s National Petroleum Company (KNPC) plans to sign the main contracts awarded to companies to build the Al-Zour oil refinery on Tuesday. Construction of the 615,000 barrel per day refinery which would be the largest in the Middle East could be a major boost to Kuwait’s economy, which has slowed due to political tensions and low oil prices. “This is an important milestone,” CEO of KNPC Mohammed Al-Mutairi told Reuters. Al-Mutairi said commissioning of the refinery was expected to start in November 2019.
The project cost is about KD 4.8 billion KD ($15.9 billion), he said, adding that KNPC would not seek any external financing. Commissioning for Kuwait’s Clean Fuel Project is expected to start in April 2018, he said.
That project is to upgrade and expand two of Kuwait’s largest refineries to focus on producing highervalue products for export, such as diesel and kerosene. “We are in the final stages for talking with the government corporate financing, the total project cost is around 4 billion dinars,” he said. Al-Mutairi said the company would look to finance 70 percent of the project externally and the other 30 percent would be funded internally through the Kuwait Petroleum Corporation. Sources had said in April that KNPC was in talks with banks to raise a loan worth around $10 billion for the project. Atender to build a permanent liquefied natural gas (LNG) import terminal will close in November, with the awarding of contracts for project expected by early 2016, Mutairi said.
The cost of the 3 billion cubic feet per day terminal is about KD 900 million. Oil investments for producing countries have declined by 21 percent, OPEC Secretary-General Abdullah Al-Badri stressed on Monday. Al-Badri told the press, on the fringes of the 2nd Kuwait Oil and Gas Show and Conference 2015, that there is a clear decline in the production of oil shale following a fall of oil prices, noting that the current oil shale production reached the level of zero.
In the next year, he said, world oil production will be in the minus, hence, it will reflect positively on OPEC. Nonetheless, he added that no one can predict the movement of oil prices. On a suggestion by the US Congress on exporting US oil, Al-Badri said that the decision will not affect OPEC production nor its markets, since oil markets are seeing a surplus at the moment. He added that there should be an agreement to reduce oil surplus in order to solve the retreat of oil prices. This solution should be a joint effort by OPEC and non-OPEC countries.