Kuwait's Energy Sector: Navigating the Transition towards Sustainability
- Kuwait | 24 June 2023
As the world entered the 2020s, the COVID-19 pandemic acted as a catalyst, accelerating the global shift towards a green and clean energy system. However, despite this momentum, the immediate energy consumption worldwide continues to heavily rely on the oil and gas sector. Gulf countries, including Kuwait, play a crucial role in this domain, investing in initiatives to enhance production efficiency and capacities. One notable example is the Duqm refinery project in Oman, a joint venture between Oman Oil Company and Kuwait Petroleum International, set to commence operations in 2023.
These downstream facilities exemplify the potential for regional partnerships and require substantial investments. They play a vital role in ensuring the long-term functionality of the global economy, considering that fossil fuel consumption is projected to account for 78% of the global energy matrix by 2032, a slight decrease from 81% in 2022 (as estimated by the Economist Intelligence Unit). While countries undertake numerous decarbonization projects, many oil companies are striving to achieve net-zero emissions by 2050.
The transition towards sustainable energy is a gradual process, prompting Kuwait to make preparations to meet global fossil fuel demands. The development of facilities like Duqm and the forthcoming Al-Zour refinery complex exemplify Kuwait’s commitment. The Al-Zour complex, representing a USD 16 billion investment, involves the collaboration of Tecnicas Reunidas, Sinopec Engineering, and Hanwa Engineering & Construction. Once operational, it will have the capacity to process 615,000 barrels per day (bpd) of Kuwait light crude or 535,000 bpd of blended heavy crude.
The Al-Zour refinery complex aims to produce high-quality fuels for the international market. In this endeavor, it serves as a cooperative project between Kuwait and China, aligning with China’s Belt and Road Initiative. This initiative encompasses substantial investments in approximately 150 countries, intending to improve global logistical connectivity through the establishment of an extensive infrastructure network.
The Kuwaiti oil and gas industry has experienced significant acceleration, generating increased production and opportunities for external investors. Robin Bose, CEO at Petrogulf Gulf Petroleum Investment, which provides equipment and assets to companies in the sector, acknowledges the transformation and highlights the potential for local companies to partner with international counterparts for joint ventures. This collaboration allows them to participate in larger-scale projects that might otherwise be beyond their capabilities.
While the hydrocarbons industry attracts substantial foreign participation, the utilities sector in Kuwait still faces hurdles in the development of a local private industry. Factors such as the limited adoption of the public-private partnership (PPP) framework by foreign investors and the global pandemic contribute to the slower progress in this area. Paul Frain, CEO of Shamal Az-Zour Al-Oula Power & Water Company, the only independent power and water project (IWPP) in Kuwait, emphasizes the need for greater privatization in the sector.
Kuwaiti energy companies are increasingly focusing on sustainability and have entered into collaborative agreements to promote environmentally friendly operations. For instance, OilServ, a provider of services for oilfield operations, has partnered with Questor, a Canadian company, to achieve net-zero emissions. This collaboration involves alternative waste management and electricity generation techniques. Other companies also prioritize emissions reduction and collaborate with scientific entities to develop more efficient energy generation and water desalination methods.
These collective efforts allow Kuwait to continue investing in its vital hydrocarbon sector, which plays a significant role in its development and sustains the global economy’s product quality requirements. Moreover, the initiatives undertaken contribute to the growth of sustainable projects, establishing the foundation for a cleaner and greener Kuwaiti economy. The transformation is well underway, with Kuwait adapting to evolving energy needs and striving for a sustainable future.