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Regional war to have lasting impact on Kuwaiti oil sector

31 July 2026

 

The ongoing regional war is likely to have a lasting impact on Kuwait’s oil sector, which is one of the world’s most reliant on tanker shipments through the Strait of Hormuz.

Shipping through this key chokepoint has been severely disrupted since the US and Israel attacked Iran on 28 February.

Unlike Saudi Arabia and the UAE, Kuwait does not have a coastline outside the Gulf that would provide an alternative route for crude exports by oil tanker.

It also lacks a major oil export pipeline, such as Iraq’s Kirkuk-Ceyhan export route, which has a nameplate capacity of 1.6 million barrels a day (b/d).

Kuwait’s absence of alternative export routes meant that, in April, the country recorded zero crude oil exports for an entire month for the first time since the end of the Gulf War in 1991, according to shipping monitor TankerTrackers.com.

During the following two months, exports rose slightly due to the temporary peace deal, but shipments remained a fraction of the levels seen before the US and Israel attacked Iran in February.

In June, Kuwait exported an average of about 500,000 b/d, down from more than 1.7 million b/d in December last year.

Since then, Kuwaiti crude exports are thought to have fallen to near zero again after the collapse of the peace deal signed by Iran and the US in Versailles on 17 June.

Under attack

In addition to the crisis caused by disruption to exports through the Strait of Hormuz, Kuwait’s oil and gas sector is also suffering from direct attacks on its infrastructure.

Facilities in Kuwait have been hit by Iranian missiles and drone attacks multiple times since the regional conflict began.

State-controlled media has limited the publication of details about which sites have been hit in recent weeks.

Even so, it is clear that some of the most frequently hit facilities include the Mina Al-Ahmadi and Mina Abdullah refineries, operated by Kuwait National Petroleum Company (KNPC).

On the morning of 20 March 2026, following a drone attack, fires broke out across multiple units at the Mina Al-Ahmadi refinery.

In April, the same refinery came under attack three times within a two-week period. These attacks also started fires in a number of operational units, forcing them to shut down.

In early April, Iranian attacks also hit offices of Kuwait Petroleum Corporation (KPC), as well as facilities operated by its subsidiary, Petrochemical Industries Company (PIC).

In a statement released on 5 April, KPC said: “On 5 April, 2026, the oil sector complex located in Shuwaikh, which houses the KPC building and the Ministry of Oil, was attacked by drones, resulting in a fire at the building and significant material damage.

“Several operational facilities belonging to the corporation, both at KNPC [sites] and PIC [sites], were also subjected to similar drone attacks, leading to fires at a number of these facilities, and causing significant material damage.”

Attacks continued in July as the peace deal between the US and Iran frayed.

On 18 July, KPC said that “one of its vital oil facilities” was hit in repeated Iranian attacks, causing “significant material damage and some injuries”.

“The injured were provided with medical assistance and the site was evacuated, while the response to the attack is being handled in coordination with the relevant state authorities,” the corporation said in a statement.

A couple of days earlier, an attack on an offshore oil platform in Kuwait caused “material damage” and injured one worker, according to a statement released by the official spokesperson for Kuwait’s Ministry of Defence, Major General Saud Abdulaziz Al-Otaibi.

The offshore platform was associated with the state-owned upstream operator Kuwait Oil Company (KOC), and the worker required medical care.

While Kuwait has continued awarding contracts and announcing deals, the security situation is casting a long shadow over the country’s oil and gas sector

Announcing deals

While crude exports have stalled and progress across projects has slowed, Kuwait has continued to announce deals and push ahead with some tender processes.

Recently, India’s Larsen & Toubro (L&T) won a contract from KOC for the engineering, procurement and construction (EPC) of Jurassic Light Oil storage and export facilities, as well as upgrades to KOC’s existing export network.

The scope of work under the contract, which was formally issued to L&T earlier in July, includes the EPC of six new crude oil storage tanks – each with an operating capacity of 618,000 barrels – along with associated facilities, on a lump-sum turnkey basis, the Mumbai-headquartered company said on 29 July.

While the contract award indicates that the oil sector is functioning at an administrative level, there is significant uncertainty about when L&T will be able to begin execution given the current security environment.

Additionally, KOC recently signed a $16bn infrastructure agreement with a consortium comprising Blackstone, Brookfield and KKR to establish a joint venture covering the country’s domestic and export crude oil pipeline network.

Structured as a 20.5-year lease-and-leaseback transaction, the deal covers all 13 of KOC’s crude oil pipelines, spanning about 320 kilometres.

Known as Project Peregrine, the transaction is set to become Kuwait’s largest energy infrastructure partnership and the largest foreign direct investment in the country’s history.

Under the agreement, KOC will retain a 51% ownership stake in the newly formed joint venture, while Blackstone, Brookfield and KKR will collectively own the remaining 49%, with each investor holding an equal share. KOC will maintain full ownership, operation and maintenance of the pipeline system.

The joint venture will lease the pipeline usage rights from KOC and grant the company exclusive rights to operate the network in exchange for a volume-based tariff. The agreement does not affect Kuwait’s authority over crude production or refinery throughput.

The transaction is expected to generate $7.85bn in upfront proceeds for KOC.

These funds could prove useful in the current climate of dramatically reduced oil revenues.

Outlook dims

While Kuwait has continued awarding contracts and announcing deals, the security situation is casting a long shadow over the country’s oil and gas sector.

Prior to the start of the regional war, Kuwait was planning a major expansion in oil exploration and production, but these plans look increasingly unrealistic amid the deteriorating security situation and unanswered questions about the future viability of the Strait of Hormuz as an export route.

Kuwait and Saudi Arabia’s plans to develop the offshore Dorra gas field are also increasingly uncertain.

The field lies offshore in the Saudi-Kuwait Neutral Zone, and its ownership is disputed by Iran, which refers to the field as Arash.

Iran claims the field partially extends into Iranian territory and asserts that Tehran should be a stakeholder in its development.

The planned multibillion-dollar project to develop the field includes building new offshore facilities as well as gas processing plants located both in Saudi Arabia and in Kuwait.

The $3.3bn gas processing plant due to be developed in Kuwait would have been the country’s biggest oil and gas sector project in more than a decade. However, it is already facing significant delays due to the war, and it is difficult to see how the necessary offshore facilities will be constructed amid the current security situation.

Persistent concerns

Even if a new peace deal is reached soon and shipping returns to normal in the Strait of Hormuz, the consequences of the recent shutdowns in Kuwait are likely to linger.

Ramping production back up to pre-war levels at Kuwaiti oil fields is likely to be a slow and difficult process that will take several months at a minimum.

In addition, concerns are likely to persist about the sector’s vulnerability to regional conflict and the consequences of possible future closures of the Strait of Hormuz.

International contractors are likely to prioritise markets perceived as less risky, and investors may favour opportunities where export routes are less constrained.

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Wil Crisp

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    After initial concerns that the market would experience a sharp downturn and project cancellations following the onset of conflict in the region, regional president McGrail says WSP has yet to see a single major contract cancelled across its regional portfolio.

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    “None of the projects we are currently involved in have been put on hold or suspended,” he says. “It is more re-evaluation. Some of that is investor sentiment, but some of it is materials and logistics as well, which people do not necessarily consider.”

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    “Requests for proposals have not slowed down across any of our disciplines or business units,” he says. “We are definitely seeing an uptick in infrastructure.”

    Infrastructure pivot

    That focus points to where McGrail expects the next few years of growth to come from. Rail sits at the centre of the UAE story, alongside road upgrades and other major developments in Abu Dhabi. In Dubai, the clearest signal of intent is the expansion of Al-Maktoum International airport.

    “Al-Maktoum is a really good indicator of the future direction of travel,” he says. “That is not a project that is slowing down. There has been a commitment to Emirates that it will move there, and it is still progressing.”

    The scale of the airport – and the challenge of relocating an airline the size of Emirates in one move – raises the question of how it will be funded. Here, McGrail returns to the theme of stability and to the mechanism that underpins it.

    “One of the beauties of this region is the ability of government to step in,” he says. “They can fund it. If the private sector does start to suffer, that is the backstop. They push money into infrastructure – roads, rail, airports – which keeps our industry moving.”

    Saudi reset

    In Saudi Arabia, the recalibration story predates the conflict, and McGrail says the change should be read as a strength rather than a retreat.

    “I am positive,” he says. “When the reprioritisation started at the beginning of 2025, having lived through the global financial crisis here, I saw the decision to stop, re-evaluate and reprioritise expenditure as a positive. When Vision 2030 was set, Saudi Arabia had not won Expo or the World Cup, so the reprioritisation was the right thing to do. Saudi Arabia will come out of it stronger. Short-term pain, long-term gain.”

    The nature of the work is shifting with the budget. McGrail sees the kingdom moving towards a model long familiar in the UAE, in which core infrastructure and a handful of landmark buildings are delivered first, before surrounding plots are carved up and sold on.

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    That approach is increasingly tied to public-private partnerships (PPPs), although McGrail is measured on how far the model will stretch.

    “PPP is definitely becoming more prevalent on some of the larger infrastructure projects, though still not as significant as it was made out to be when they first started talking about it,” he says. He sees industrials, mining, healthcare and schools as a natural fit, rather than PPP becoming a blanket procurement route.

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    “Aviation is definitely a key area of focus for us as we head into the next 12, 24, 36 months,” McGrail says.

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    The $3bn Taweelah C combined-cycle gas turbine (CCGT) project has been the UAE power sector’s standout contract award this year, accounting for the majority of the $4.17bn in awards as of early September.

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    > COMMENT: Saudi projects hold steady
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    > ECONOMY: Conflict bolsters case for Saudi economic diversification
    > BANKING: Saudi lenders readjust to lower lending and deposit climate
    > UPSTREAM: Aramco upstream spending gathers pace
    > DOWNSTREAM: Sabic steps up Saudi petchems investment
    > POWER: Saudi Arabia’s power award activity slows
    > WATER: Saudi water sector hits sharp slowdown
    > CONSTRUCTION: Saudi construction defies the headwinds
    > TRANSPORT: Saudi infrastructure pushes forward amid conflict
    > DATABANK: Saudi data indicates project spending shift

    To see previous issues of MEED Business Review, please click here
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    The US Department of State has initiated market research to procure a design-and-build contract for the US Pavilion at Expo 2030 Riyadh.

    According to procurement documents released through the US federal contracting portal, the project covers the full design, construction, exhibition fit-out, maintenance, and eventual decommissioning and removal of the national pavilion.

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    The masterplan covers 6 square kilometres, making it one of the largest sites ever designated for a World Expo event.

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    The Public Investment Fund, Saudi Arabia’s sovereign wealth vehicle, launched Expo 2030 Riyadh Company – a wholly owned subsidiary – in June 2025 to build and operate facilities for Expo 2030.

    MEED’s October 2026 report on Saudi Arabia includes:

    > COMMENT: Saudi projects hold steady
    > GOVERNMENT: Riyadh looks to reset its regional defence outlook
    > ECONOMY: Conflict bolsters case for Saudi economic diversification
    > BANKING: Saudi lenders readjust to lower lending and deposit climate
    > UPSTREAM: Aramco upstream spending gathers pace
    > DOWNSTREAM: Sabic steps up Saudi petchems investment
    > POWER: Saudi Arabia’s power award activity slows
    > WATER: Saudi water sector hits sharp slowdown
    > CONSTRUCTION: Saudi construction defies the headwinds
    > TRANSPORT: Saudi infrastructure pushes forward amid conflict
    > DATABANK: Saudi data indicates project spending shift

    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/20580855/main.jpeg
    Yasir Iqbal