The will to diversify in KuwaitFebruary 15, 2018
Wafik Beydoun, Total Kuwait general manager and country chair, talks to TOGY about trends in the oil and gas market, the impact of the rise of renewables and the company’s evolving collaboration with KOC. Total’s global activities cover the entire oil and gas chain, from E&P to power generation, transportation, refining, petroleum product marketing and international crude oil and product trading.
On cost savings: “By lowering the breakeven point, one can make projects profitable even when the oil price is low. Total has been extremely successful in doing so, with a cost saving of USD 3.7 billion in 2017.”
On Kuwait’s 4-million-bopd target: “Reaching these targets, two years from now, is possible by appropriately optimising the investment strategy with processes and technologies in operations, empowering their staff/organisation to work in an integrated and multi-disciplinary way, and last but not least, reviewing incentives/business models with their partners.”
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How receptive are the K-companies in adopting technologies such as solar power and EOR?
EOR already garners much attention and KOC has been putting a lot of effort towards it. They are aiming to do pilots in which they use solar panels to heat water for steam generation in the north of Kuwait. The idea makes sense, bearing in mind that those EOR technologies and processes are very field-dependent. Depending on the oil and reservoir quality, steam may not be the appropriate solution, and for example CO2 or chemicals such as surfactants or polymers may be more suited.
Solar is another ball game. It is a technology that is still in its infancy in Kuwait compared to other countries in the region. Kuwait has the will to develop it with a vision to have 15% of its total electricity consumption from solar energy by 2030. This is a big challenge, because the country may be now just at a small fraction of that target.
In speaking to TOGY last year, you indicated that you were looking to amend and expand your technical services agreement (TSA) with KOC to include special projects. How does the new TSA differ from the previous TSA?
We signed a renewal of our TSA in December 2017, and we are operating under the same overall framework. It allows us to provide, at KOC’s request, skilled engineers to work either on specific projects, mobilising a joint integrated team and/or in specific entities in KOC. We believe that working in an integrated and multi-disciplinary fashion through a joint KOC-Total team would bring more value to KOC as it is more representative of how IOCs work with their partners. This is a point that differs from the previous TSAs.
What kinds of projects do your specialists work in?
Our specialists are involved in different activities in KOC including field appraisal, EOR, drilling, operational planning, and HSE. On fields that KOC intends to develop, we support them in appraisal/pre-development work with the integrated team approach. We also maintain, when required by KOC, a few specialists individually in other parts of the organisation.
What key market trends do you see and how is Total positioned within them?
The impression is that the market is recovering, and you can see that with the oil price heading upward. In contrast, there is also the perception that there is a lot of oil readily available to meet market demand, that globally regulating the oil market is not sustainable, and that the transition to renewables is accelerating. Because of these apparent conflicting factors, the overall market has not yet stabilised (if it ever will).
Total’s position in this environment is to keep optimising what we do best (operational excellence) while reducing operational costs as much as possible without compromising on HSE. By lowering the breakeven point, one can make projects profitable even when the oil price is low. Total has been extremely successful in doing so, with a cost saving of USD 3.7 billion in 2017.
Another market trend in the region is the pace at which NOCs are including renewables in their portfolio of activities, planning and R&D programmes, mainly solar energy. Some are faster than the others, but overall this is a robust strategy to prepare for the energy transformation. Total for example is strengthening its expertise in renewables, especially in solar energy, given its many advantages (more than 30 years of experience) to ensure success and meet the growing demand for electricity.
What about trends here in Kuwait?
Oil export revenues for Kuwait are still predominant (85%-plus of the total export of goods and services). KPC has also stated that it plans to go for 4.75 million bopd of crude oil capacity by 2040. This is a challenging task and may require new forms of partnerships with foreign companies (including IOCs). Kuwait also wants to engage tangibly in renewables, starting with solar energy, with 15% of the total electricity consumption coming from solar energy by 2030. You can sense the strong will by the leadership to diversify, and KPC appears to be spearheading this initiative.
Are the targets for achieving 4 million bopd for 2020 viable and what are the challenges faced in achieving those targets?
The targets are ambitious. Kuwait’s current production is around 2.7 million bopd, with a capacity of 3.2 million bopd. Reaching these targets, two years from now, is possible by appropriately optimising the investment strategy with processes and technologies in operations, empowering their staff/organisation to work in an integrated and multi-disciplinary way, and last but not least, reviewing incentives/business models with their partners.
Is Kuwait amenable to changing its business model with IOCs and is it moving in that direction?
They are moving in that direction and if you talk to some of the leaders in K-companies, some see this as a necessity. There are a few examples illustrating that when a supply-demand imbalance transforms into a crisis, governments react by bringing drastic changes, with new incentives/business models to attract IOCs. Brazil and Mexico are good examples. But I do not know if Kuwait is close or not to this situation. Currently, the types of agreements that are proposed by K-companies to IOCs present in Kuwait are essentially technical service agreements (TSAs) and enhanced TSAs.
Is Total helping Kuwait to ramp up its domestic gas production or provide LNG?
There is clearly a demand for more gas in Kuwait. The good news is that the geopolitical situation of Kuwait in the region opens up diverse potential opportunities to import gas (for example, pipeline and LNG). In addition, Kuwait has also domestic gas reserves (for example, Jurassic gas assets, that our sour and difficult to produce) that should also, at some point in the future, be available. Total maintains open channels with KPC on such issues, and has demonstrated in the past our continued interest to be part of the Kuwaiti oil and gas developments.
How is Total positioning itself in relation to downstream and petrochemical activities in Kuwait?
Kuwait is deploying a quite unique integrated project, involving a refinery, a petrochemical complex and LNGI plants. Total is keen to be part of this project. Total has already dealt with similar downstream integrated projects in the region, and are aware how to best address challenges in this field.
What are your short- and long-term goals in Kuwait?
Total was born in the Middle East in 1924. Ninety years later, Total’s production in the Middle East and North Africa represents more than 20% of the group’s production! We value our historic bonds in this strategic region and continuously seek new partnerships with our local partners which make sense to all parties. Our job is to do the best we can, in each country where we operate, and work in line with the country’s short- and long-term vision, to offer our expertise and know-how. We are, of course, active all across the energy value chain (upstream, downstream and renewables).
In Kuwait, we started our partnership more than 20 years ago. We remain engaged to further contribute to the achievement of the country’s energy objectives by identifying and developing win-win business opportunities with KOC and other K-companies, both in Kuwait and internationally – not only in exploration and production but also in downstream and solar.
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