Time to exit from overseas oil investments! – Kuwait should follow Norway
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In line with the recent decision of Norway to sell its oil and gas investments in international oil companies, which are mainly shares worth over $60 billion, we in Kuwait should also follow suit, as the future of oil is uncertain. We must focus on our domestic oil and gas industry instead of investing in others that are in competition with our oil. The examples are many, and the time to address this issue has long gone.
Developing our oil and gas industry for maximizing production and cutting costs should be our priority. In addition, we must focus on developing our local knowhow as well as reduce costs in order to remain competitive on a long term basis with other crude oil producers.
Developing free gas fields should be of highest importance, as Kuwait is lacking in this. It essentially is a must to produce enough to meet the domestic needs for generation of electricity and water, thereby reducing our costs from imports, which reach millions of dollars every year, for the next five years or until the completion of Al-Zour Refinery.
The main overseas project that Kuwait should exit from by selling is KPC’s KUFPEC arm of foreign oil and exploration which was established in 1981 with a clear target objective of achieving 200,000 barrels of foreign oil and gas equivalent by 2020 or three years from now. Today this company is barely producing 70,000 barrels in over 15 countries. To reach the target level, KPC must invest close to $1.5-2 billion for producing the remaining 130,000 barrels. It will just be pouring more cash and funds but without creating any job opportunities for nationals or adding any technical and knowhow values to KPC.
In view of the uncertainty surrounding oil’s long term status, it would be worth reconsidering KPC’s oil strategy and pulling out from foreign oils investments that are competing directly with Kuwaiti crude oil in the market.
The same applies to our overseas petrochemical investments in Europe, USA, and Canada in terms of buying parts of various plants but again without creating any job opportunities or achieving any added values except perhaps some financial results. However, this can be done through other financial institutions, as this doesn’t fit with KPC’s core objective.
Again, we should combine resources in oil and gas internally instead of wasting them on non-core activities.
It is not shameful to follow the examples of others, as Norway itself had copied our example in creating its sovereign wealth fund after Kuwait’s pioneering experience in this field.
Time is running fast and the future of oil does not look positive. Let us take the safe route and invest in other fields besides oil and gas.
By Kamel Al-Harami – Independent Oil Analyst
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