The cost of producing a barrel of Kuwaiti oil witnessed a “crazy” jump by about 90% during the past 10 years, rising from the level of 1.354 dinars in 2011/2012 to 2.582 dinars in 2020/2021, which sounds a warning bell that the operating expenses of the Kuwait Petroleum Corporation and its subsidiaries responsible for oil production should not continue the current treand.
The data revealed the total cost of production, including recovered financing benefits, amounted to 2.59 billion dinars during the fiscal 2020/2021, up from 1.57 billion dinars in fiscal 2011/2012, reports a local Arabic daily.
The main reasons for the increase in the cost of barrel production for the State of Kuwait during the past years are due to the growth and expansion of exploration and production activities by entering into new fields in terms of types of oil and gas, and the aging of facilities requires an increase in maintenance operations to maintain their safety, in addition to the obsolescence of some reservoirs and the rise in The percentage of water production from it, and the following are the main reasons for the increase in recent years:
Causes related to the obsolescence of reservoirs:
— The aging of traditional reservoirs requires increasing operations to maintain their production, such as well maintenance operations
— Increasing quantities of produced water, which requires building facilities to deal with it and improving existing facilities
— The increasing need to carry out water injection projects to maintain the pressure of oil reservoirs
— The increasing need to apply industrial lifting technology, such as installing submersible electric pumps in wells, with the increase in the quantities of water produced
The following are the reasons related to the development of new, more difficult reservoirs:
— Operating and maintaining Jurassic gas and light oil production facilities in northern Kuwait.
— Maintenance of difficult deep Jurassic wells with high temperature and high pressure.
— The increase in sour gas processing operations with the increase in the production of Jurassic gas.
— Commencement of high-cost heavy oil production.
— Development of new and newly explored oils.
With regard to the measures taken by the KPC to control costs, is the company’s keenness to control the costs of oil and gas production through several initiatives it undertakes, including:
— Adopting different and modern designs for drilling wells and stimulating them in order to increase their productivity and reduce the duration and cost of drilling.
— Establishing effective work methods to ensure integration and coordination.
— Setting performance indicators to improve operations and rationalize expenditures.
— The application of modern technology aimed at raising the efficiency of operations and rationalizing expenses.
Regarding the elements included in the costs of oil production, the data showed that it includes the cost of workers’ salaries and benefits, the cost of contracts such as maintenance and operation contracts, services and employment contracts, etc., and the cost of materials and utilities (water and electricity), general expenses and depreciation. Accounting for these costs is organized between the KPC and the Ministry of Environment through the laws and decrees regulating this, namely:
— Decree establishing the Kuwait Petroleum Corporation No. 6 of 1980.
— The Decree on Financial Bases Related to the Marketing of Crude Oil and Gas belonging to the State issued on January 17, 1981, Article 3.
The sources stressed that the Kuwait Petroleum Corporation has sufficient production capacity to raise actual production in light of the unstable global conditions and the increasing demand for public oil, and that the corporation is constantly working on the completion of many projects that would raise the production capacity to reach the target production in order to meet any increase future if requested by the Organization of Petroleum Exporting Countries (OPEC).
