KPC to borrow $45 bn in the coming five years

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Last month, Kuwait Petroleum Corporation (KPC) announced its decision to borrow about KD 14 billion ($45 billion) in the coming five years, which is about KD 3 billion per year, to meet its strategic long-term investment plans mainly for exploration, and for developing and enhancing old crude oil fields. It must borrow internationally, and try to privatize some of its non-core activities that impose more burden upon it.

However, it necessitates a form of consensus with the parliament, ensuring non-intrusiveness and alignment with the state’s interests, by approved regulations, mirroring practices adopted in neighboring countries. A clear example is the sale of five percent of the formidable Aramco. However, it’s noteworthy that KPC is neither pursuing nor considering such a daring move. KPC has outlined its main investment strategies, allocating 60 percent toward the development and exploration of new oil discoveries, as well as enhancing and optimizing production from existing fields.

This includes a focus on increasing free gas production, which is not independent and unrelated to oil production. Hence, the core of its future investments relies on boosting crude oil production, which has experienced a decline since 2016. International oil companies decline to engage with our friends and develop their production potential unless some form of agreement guarantees a specified volume for each barrel produced through their expertise and technology. Working on a rental basis is a thing of the past. However, our Kuwait Oil Company (KOC) either rejects acknowledging such arrangements or struggles to address concerns raised by parliament members to avoid complications.

This is even though many neighboring countries have established similar production-sharing arrangements within the agreed-upon rules and conditions of sovereign states. Indeed, both KPC and KOC must play a proactive role in advocating for inviting oil companies. It is crucial to openly acknowledge our limitations in increasing crude oil production to nearly three million barrels per day or beyond. As the weakest link in oil production management and output, Kuwait must rely on the expertise and technology of international oil companies.

Simultaneously, KPC is not obligated to borrow the entire $45 billion in one go. It has the option to generate a portion of the required funds by selling and privatizing certain companies, initially created and developed by the private sector. This includes entities such as tanker and petrochemical companies. Notably, our refining company had a 40% ownership by the private sector when first established in 1962

By Kamel Al-Harami
Independent Oil Analyst
Email: [email protected]

This news has been read 728 times!