ARTICLES & UPDATES

Introduction:

Kuwait, a small country located in the Arabian Gulf, has a population of approximately 4.3 million people and a land area of 17,818 square kilometres. The country’s economy is heavily reliant on the oil and gas sector, which accounts for around 90% of government revenue and 60% of GDP. Kuwait is a member of the Organization of the Petroleum Exporting Countries (OPEC) and has the world’s sixth-largest oil reserves, making it a key player in the global energy market.

Regulatory overview

The Ministry of Oil is the governmental body that formulates and implements policies related to the oil and gas sector. It plays a key role in regulating and supervising oil and gas activities in Kuwait.

The Kuwait Petroleum Corporation (KPC), is a state-owned entity that runs the country’s oil sector. Under KPC there are several other companies that are collectively known as the ‘K Companies’.

Kuwait Oil Company handles the upstream operations and the downstream operations are carried out by the Kuwait National Petroleum Company (KNPC). The Kuwait Oil Company is the Largest State-owned oil Company in Kuwait by revenue and is responsible for Oil production.

1. Kuwait Oil Company (KOC): KOC oversees the exploration and production of oil and gas resources within Kuwait.

2. Kuwait Gulf Oil Company (KGOC): KGOC manages onshore/offshore operations in Kuwait’s 50 per cent share of the partitioned neutral zone between Kuwait and Saudi Arabia.

3. Kuwait Foreign Petroleum Exploration Company (KUFPEC): KUFPEC is tasked with conducting oil and gas exploration and production activities beyond Kuwait’s borders.

4. Kuwait National Petroleum Company (KNPC): KNPC handles refining, liquefied gas operations, and the marketing of petroleum products in Kuwait.

5. Kuwait Integrated Petroleum Industries Company (KIPIC): KIPIC operates and oversees an integrated complex for refining, petrochemical manufacturing, and natural gas importation at the Al-Zour complex in Kuwait.

6. Petrochemicals Industries Company (PIC): PIC is responsible for the production and promotion of petrochemical products, including the $2 billion EQUATE petrochemical joint venture project with Dow Chemical.

7. Kuwait Oil Tanker Company (KOTC): KOTC manages the transportation of crude oil, refined products, and liquefied petroleum gas.

8. Kuwait Petroleum International Limited (KPI): KPI is in charge of refining and marketing operations outside Kuwait, primarily focusing on Europe and Southeast Asia.

Developments in the Oil & Gas Sector:

The Kuwait Petroleum Corporation (KPC) has outlined ambitious plans for its Oil and Gas sector, aiming to boost oil production capacity to 4.75 million barrels per day by 2040 and natural gas production to 4 billion cubic feet per day by 2030. To achieve these goals, KPC is set to invest $44 billion in various oil production, exploration, and development projects until 2025, as part of a larger 5-year plan approved in 2021. The corporation plans to borrow $19.8 billion to fund these initiatives.

A significant milestone was reached with the completion of the Clean Fuels Project in November 2021, enhancing the Mina Abdulla and Mina Al-Ahmadi refinery complexes. Current production stands at 410,000 barrels per day, with expectations to reach the maximum capacity of 615,000 barrels per day by the end of 2023.

In 2015, Kuwait National Petroleum Company (KNPC) awarded four packages for the construction of the country’s fourth refinery, the $30 billion Al-Zour Refinery. Operated under the Kuwait Integrated Petrochemical Industries Company, it became fully operational in 2023. The Al-Zour complex is poised to integrate with the planned $10 billion Petrochemicals Complex and a $4 billion gas import facility, the latter of which was completed in November 2021.

Further, Kuwait Oil Company (KOC) is expected to award the engineering, procurement and construction (EPC) contract for its Office Building for the Oil & Vital Protection Department and Perimeter Fence project in South Ratqa Field by the second quarter of 2024. The EPC tender was issued on 10 December 2023 with a bid submission deadline of 10 March 2024. The EPC contract is expected to be awarded by June 2024, with the overall project completion and commissioning scheduled for the first quarter of 2026.

How Foreign Businesses can enter this Sector in Kuwait, Limitations and Ways to Enter

Kuwait does not allow ownership or investment by the private sector or foreign companies in the upstream oil market. However, there are areas in which foreign companies can participate in the oil and gas sector in Kuwait through Joint ventures, service contracts, or other collaborative arrangements between the KPC or its subsidiaries and the foreign company.

Some of the key areas are as follows:

Oilfield Services: Providing specialized services such as exploration surveys, drilling, well maintenance, oilfield equipment and supplies, and reservoir management.
Consultation services: Providing consultation services such as regulatory compliance, Environment Impact Assessment, Health and Safety Consulting, Risk Management, supply chain, project management, etc.
Engineering, Procurement, and Construction (EPC) Projects: Participating in the design, construction, and installation of oil and gas infrastructure.
Technology and Innovation: Providing advanced technologies solutions for enhanced oil recovery (EOR), monitoring oil production, workflow improvement, environmental monitoring, and Cyber Security.
Downstream Activities: Engaging in downstream activities such as refining, petrochemical production, transportation, distribution, and marketing to convert crude oil and natural gas into various end-user products
Environmental and Safety Consulting: Offering expertise in environmental impact assessments, safety consulting, and risk management.
Logistics and Supply Chain: Providing transportation and logistics services for the movement of crude oil and refined products.

It is important to note that the businesses that are desirous to participate in the opportunities with the KOC or its subsidiaries have to meet the pre-qualification requirements. A local agent is not mandatory during the prequalification stage; however foreign companies should have a local partner to bid on the projects as of the date of this article. (The recent amendment in public tender law which allows foreign companies to bid without the agent requirement has been enacted but it is still not practically implemented)

The companies interested in working with KOC shall first register with KOC through the E-Business Portal: https://ebusiness.kockw.com/ to apply for an existing work/products category.

The portal contains detailed information about the process. Please note there is a separate pre-qualification process for each of the subsidiaries of Kuwait Petroleum Company. Pre-qualification requirements and regular updates are published on the website, in the Kuwait Al-Yawm Gazette and in local/international newspapers.

How Abdul Razzaq Abdullah and Partners Law firm can help?

At Abdul Razzaq Abdullah and Partners, we have extensive experience in providing legal advice and assistance to international businesses interested in entering the oil and gas sector in Kuwait. Our team of experienced attorneys can provide comprehensive legal services, including:

Legal documents support: providing support in contract negotiation, drafting of agreements and contracts pertaining to the Oil and Gas industry aligning with the client’s specific requirements.
Legal Advice on Oil and Gas matters: our legal team offers strategic legal advice tailored to the specific needs of your project, whether it’s regulatory compliance, risk management, or contractual obligations, we provide guidance to ensure that your operations are legally sound.
Local Agent solutions: We assist our clients in identifying and selecting reputable local agents, conducting scrupulous due diligence and facilitating smooth agency collaborations that align with local regulations and industry standards.
Tendering and Bidding support: Participating in tenders and bidding requires meticulous legal preparation. We guide our clients through the entire process, from reviewing tender documents to providing comprehensive bids, ensuring compliance with legal requirements.
Regulatory Compliance: We help the clients to comply with the regulatory framework of Kuwait; assisting them in obtaining approvals, permits, licenses, etc.
Dispute Resolution: In the event of disputes, our firm offers effective resolution strategies, whether, through negotiation, mediation, or litigation, we work to protect our clients’ interests that may arise during the course of business.

Conclusion

The oil and gas sector in Kuwait is a key driver of the country’s economy and a major contributor to its government revenue. The sector is governed by a complex legal and regulatory framework, with the Kuwait Petroleum Corporation and its subsidiaries serving as the primary entities responsible for the exploration, production, and export/sale of oil in the country.

International businesses interested in entering the sector must do so through a joint venture or partnership arrangement with KPC or one of its subsidiaries.

At Abdul Razzaq Abdullah and Partners, we have extensive experience providing legal advice and assistance to local and international businesses interested in entering Kuwait’s oil and gas sector. We have clients presently working in the Oil and Gas sector, predominantly in exploration projects, well drilling, pipeline operations, power generation stations, and refinery plants. Our team of experienced attorneys can provide comprehensive legal services, including advice on the legal and regulatory framework, assistance in negotiating and drafting contracts, and assistance in obtaining the necessary approvals and permits.

If you have any questions or concerns, please email us at info@arazzaqlaw.com.