The Gulf is a very calm environment for drilling. It is not like the North Sea and the challenges are not as daunting as people perceive.

Abdulnaser Y. AL FULAIJ CEO KUWAIT GULF OIL COMPANY

Pause and prepare

April 26, 2017

TOGY talks to Abdulnaser Y. Al Fulaij, CEO of Kuwait Gulf Oil Company (KGOC), about how the company has dealt with the drop in oil prices, the progress it has made in current projects and the readiness of local operators to support larger oil and gas companies in the country.

KGOC was created in February 2002 to manage the Kuwaiti share of natural resources in the Partitioned Neutral Zone (PNZ) – the area shared between Kuwait and Saudi Arabia. KGOC has 50% ownership of Khafji Joint Operations, conducting the onshore and offshore activities related to exploration and drilling in the PNZ. A subsidiary of the Kuwait Petroleum Corporation, KGOC is responsible for the management of operations in the PNZ, which includes the Wafra and the Khafji fields, among many others.

• On seismic acquisition at the PNZ: “The 3D-seismic data acquisition was completed ahead of time and below budget. The quality of the seismic data acquisition was excellent and we are now in the processing and interpretation phase of that project. As far as when the results are going to come out, I cannot say for certain. The interpretation of this high-quality seismic data will probably take between two and three years but we may have determined the drilling locations before it is complete.”

• On the new pipeline: “The pipeline project is a bit delayed, but we expected this, especially with the stop in production. However, it is now underway and back on track and we believe it will continue as planned.”

Al Fulaij also discussed the suspension of operations at the PNZ and how the company and government are approaching the situation. Most TOGY interviews are published exclusively on our business intelligence platform TOGYiN, but you can find the full interview with Abdulnaser Y. Al Fulaij below.

What are KGOC’s latest developments and key goals moving forward?
The major development within KGOC is that production has stopped. We had to deal with this and resolve any issue between the [Kuwaiti and Saudi] governments in which neither we nor our joint operations partners have any say whatsoever.
We took advantage of this lull in activity in the field to develop both our senior and junior staff. We emphasised training, the development of business processes within KGOC and HSE procedures.
Another major development was the change in the senior management at KGOC. The CEO and the DCEO [deputy CEO] levels are both new and other key senior management staff are new to KGOC as well.
The objective set for us by our government via Kuwait Petroleum Corporation (KPC) was to be ready to resume production, which we are. My main focus was therefore to be ready and to resume production within the guidelines of the HSE principles of KPC and its subsidiaries, which are very important to us.

How did this pause in production affect projects that you had initiated? Where do these project advancements stand now?
The steamflooding and other projects are all on hold because the operation was frozen. On the other hand, the 3D-seismic data acquisition was completed ahead of time and below budget. The quality of the seismic data acquisition was excellent and we are now in the processing and interpretation phase of that project.
As far as when the results are going to come out, I cannot say for certain. The interpretation of this high-quality seismic data will probably take between two and three years but we may have determined the drilling locations before it is complete.

How will KGOC’s future production support KPC’s overall target of 4 million bopd?
The strategy KPC has declared for us is to produce 350,000 bopd by 2020, [effective until] 2030. We believe we can achieve this number with the reserves that we know are currently in the ground. Again, though, the resumption of production is necessary if we want to understand both what happened in the past as well as what is happening with the current situation.
The seismic data will definitely help with the fields which are currently producing by opening up opportunities for new discoveries. We are optimistic that there will be new discoveries.

There was a plan to increase the number of rigs in the country by 50% from 80 to 120. How many of these rigs are operating in the PZ?
We have very little activity in the PZ. It is mostly workovers to maintain the wells. Drilling activity is therefore almost nonexistent at the moment. We co-operate with KOC [Kuwait Oil Company] to help them out if they require rigs, but we have rigs that are inactive.

 

What are some of the geological challenges when it comes to exploration or production in the PZ?
The PZ is no different from the basins in which KOC operates or those elsewhere in Saudi Arabia. In the peninsula, the basins are just extensions of other basins, but the problem in the PZ is the issue of water production. The large volumes of water production are a condition unique to the PZ, but this situation will help us develop our knowledge as far as water handling is concerned. It may also help KOC and Saudi Arabia because they are also facing water production in their own fields.
The steamflooding project is dependent on the level of activity we are having because of the difficulties and the amount of time it takes. It has its own criteria for how a project is sanctioned. Some activity may not be economical when oil prices are low, so it will have to be postponed. The picture on the steamflooding front is therefore unclear and we are now only focusing on oil, which is easier.

When it comes to gas production, what is the potential of the Dorra field to decrease the dependency of Kuwait on gas imports?
The Dorra field is a very important supplement considering the volume of gas it can provide to the country. As far as the development of that field is concerned, that is another story between us and our partners, but KGOC support KPC’s plans for gas production and we will do our best once the Joint Operations partner agree to develop.

What kind of expertise can KGOC offer concerning future offshore projects?
We have expertise and exposure to offshore projects overseas, so we have the people that have the know-how and we can immediately supply KOC with this if they require it from us. Our experience and expertise therefore allow us to help other companies with offshore projects.

How prepared is KOC for getting local contractors to support the offshore drilling campaign?
KOC actually drilled a few wells offshore, so they have that background and they have people who have worked offshore. This is nothing new for them. Local contractors have the ability to support the offshore drilling campaign as well.
The partners they have that work in the Kuwait market, the international contractors, have had exposure to other countries in the Gulf and elsewhere, so supporting offshore activities would not be difficult for them either. The Gulf is a very calm environment for drilling. It is not like the North Sea and the challenges are not as daunting as people perceive. KOC should not have any problem operating there.

With the Khafji field, what was the share of work from both KGOC and Saudi Arabia?
For the Khafji field, the shares for both work and staff from Saudi Arabia and KGOC are 50-50. Half of the staff in Khafji is from KGOC at various levels. When construction started, we paid our share of 50%. It was similar to any other joint operations based on 50-50 participation.

Despite the halt in production, KGOC has awarded Penspen USD 10 million to build a pipeline from the Khafji field to the refinery. How it this project advancing?
The pipeline project is a bit delayed, but we expected this, especially with the stop in production. However, it is now underway and back on track and we believe it will continue as planned.
KGOC awarded a PMS contract to Penspen for the Khafji New Gas Transit Line from KJO [Khafji Joint Operations] to the Mina Al Ahmadi refinery. KGOC is working with the contractor to complete this project on fast-track basis.

What is the importance and the role of KGOC within the KPC group of companies?
If KGOC reaches the production level of 350,000 bopd, the country will produce around 3.5 million bopd. We will therefore produce almost 10% of the country’s overall production, which is significant. Additionally, KGOC has technologies for handling water production which it can offer to heavy oil developments and to gas developments. There is therefore a lot of activity.
Furthermore, we are in Joint Operations with two very well known and respected companies: SAC and AGOC. We gain cross-learning from these partnerships, which allows us to provide that value for the rest of the team and to share knowledge with them. KGOC is unique in this regard.

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