Behind Kuwait’s growing thirst for gas

The thirst for gas in Kuwait is soaring. In the space of just 72 hours, Kuwait lined up $15 billion worth of gas supply from BP and Royal Dutch Shell to help meet soaring demand. It has signed a $3 billion five-year LNG deal with BP and a $12 billion six-year LNG deal with Shell. Kuwait also signed a short-term gas deal with Qatar last month, but it is unlikely to depend on Doha in the long term due to a political rift over Doha’s support for Islamists.

In 2010, Kuwait exported the fourth largest volume of oil among member countries in OPEC. However, since 2007, Kuwait has consumed more natural gas than it has produced. In 2010, Kuwait produced about 405 billion cubic feet (Bcf) of natural gas while consuming approximately 529 Bcf. Kuwait’s 2010 estimated natural gas reserves were 63 trillion cubic feet, or less than one-quarter of proved natural gas reserves in the United States. The talking point is why is Kuwait, a huge oil producing country scrounging for gas?

The thirst for gas

 Kuwait’s electric power generation is largely natural gas-fired. Reliance on natural gas rather than oil for power generation allows Kuwait to devote more of its oil production to export markets. Since at least 2007, demand for electricity has outpaced natural gas production during the summer months.

To make up for this supply gap, since 2009, Kuwait has imported liquefied natural gas (LNG). Kuwait received its first LNG cargo in August 2009 at the Persian Gulf’s first re-gasification terminal, Mina al-Ahmadi GasPort. The re-gasification capacity of al-Ahmadi is approximately 500 million cubic feet per day (MMcf/d) of LNG. In 2010, Kuwait imported 270 MMcf/d of LNG, largely from its neighbors including Yemen, Oman, and Qatar.

Missed opportunities

For decades, Kuwait overlooked gas while it went all out to exploit their vast oil reserves. Low local gas prices also slowed development. Domestic political infighting that has long delayed Kuwait’s negotiations with oil majors to help tap its gas reserves could also derail its purchases.

Demand for gas in the Gulf

Cooperation Council (GCC) states is likely to rise more than 50 percent, from 256 billion cubic metres (bcm) in 2011 to 400 bcm in 2030.

A long-discussed regional pipeline network would meanwhile go a long way towards solving supply problems, but it has also been hampered by political disputes. Objections by top oil exporter Saudi Arabia had halted a plan for Qatar to pipe gas to Kuwait in the past. Many GCC members have long-running border disputes with each other. Riyadh also opposed Qatar’s pumping gas to the UAE, but the Dolphin Energy project went ahead regardless. It now carries about 2 billion cubic feet of gas per day to the UAE and Oman.

Frank Uzuegbunam