Kuwait power shift could spark oil boom

4 January 2024

 

The recent change of emir in Kuwait could potentially spark a record-breaking boom in oil and gas projects in the country, according to some stakeholders.

Over recent years, Kuwait has struggled to gain final approval for major oil and gas projects due to political issues.

This has led to a large backlog of significant projects that are now either ready or very nearly ready to tender.

Kuwait’s new emir, Sheikh Mishal al-Ahmad al-Sabah, was formally sworn in before parliament to begin his rule over the country on 20 December last year.

He has taken over from his half-brother, Sheikh Nawaf al-Ahmad al-Sabah, after his death on 16 December.

After being sworn in, Sheikh Mishal berated authorities for having previously appointed people to positions “that are not consistent with the simplest rules of justice and fairness”.

If he can prove that his statements in this speech were more than just rhetoric, it could have major implications for the country’s oil and gas industry.

Project potential

Industry sources believe that if Sheikh Mishal manages to form a government capable of working with parliament and pushing through legislation, it could lead to a surge in tendering and contract awards in the oil and gas sector.

MEED has revealed that the state-owned upstream oil company Kuwait Oil Company (KOC) has a list of 10 projects collectively worth $6.4bn, and aims to tender them all over the next three months.

If this goes according to plan and all of the projects are awarded before the end of 2024, it will make it the best year for upstream projects in more than 20 years.

The last time Kuwait awarded anything close to this figure was in 2015, when $4.15bn in upstream contracts was awarded.

Looking more broadly at the sector as a whole, these planned KOC contracts could put Kuwait on track to have its best year for oil and gas contract awards since 2015, which saw $18.29bn-worth of awards.  

Just $1.15bn in oil and gas projects was awarded in Kuwait last year, and only $372m the year before that.

Caution inevitable

While there is no doubt that Kuwait has the potential for a record-breaking year in terms of contract awards in 2024, many stakeholders are still uncertain whether the plans will be executed as planned.

Their caution is understandable, given that Kuwait has failed to push through significant projects for such a long time now, and the oil and gas sector is suffering from considerable inertia.

Over recent years, due to the lack of contract awards, many international contractors have closed their offices in Kuwait to focus on markets that provide more opportunities, such as Saudi Arabia and the UAE.

One stakeholder based in Kuwait said: “It’s still far too early to tell what is going to happen as a result of the new emir being named. We need time for the dust to settle before we raise our hopes.”

Talks under way

Others are more optimistic about the changes and believe the scene has been set for a new era in the country’s oil and gas sector.

Speaking to MEED, some contractors within Kuwait have said they are already in new talks with international engineering, procurement and construction (EPC) companies interested in potential oil and gas project opportunities in the country.

The more optimistic contractors believe that Sheikh Mishal’s background in the country’s security and intelligence apparatus has given him the skills he needs to push the political elite to work together and create momentum in the Kuwaiti project market.

Before becoming crown prince, Sheikh Mishal was deputy chief of the Kuwait National Guard (KNG), where he led a reform of the agency and a crackdown on corruption.

One source said: “Sheikh Mishal is well versed in how to make people do what he wants and he has made it very clear that he wants a functioning parliament and government.

“He has always been known for his discipline and his ability to persuade people to adopt certain positions that suit his objectives.

“We believe there will be a significant uptick in activity in the oil and gas projects sector this year.

“Already, we are seeing visits to Kuwait from Chinese companies and other international EPC contractors and developers.

“Kuwait remains a small country compared to Saudi Arabia and the opportunities are smaller, but they are still good opportunities and international contractors have recognised that the future is promising.”

New era

Sheikh Mishal is due to form his government next week. This process will likely be closely watched by international contractors considering a return to the country.

If he successfully puts together a government that international companies believe will be able to progress important projects, then it may well mark a new era for Kuwait’s oil and gas sector.

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Wil Crisp
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