Apr 11, 2011
Kuwait is seeking to import gas from Iraq through a deal with Royal Dutch Shell.
The emirate burns large volumes of oil in its power plants as it has insufficient supplies of cleaner-burning gas.
It has contracts with Shell for summer imports of liquefied natural gas (LNG) and for a complex project to exploit deep gasfields near its border with Iraq, but that project will take years to develop.
In the meantime, Kuwait is seeking to boost imports, some of which may come from the vast gas resources of its neighbour.
"Kuwait is not negotiating with the Iraqi government in this regard, but with international oil companies in Iraq that are developing oil and gas fields there," the Kuwaiti newspaper Al Jarida has reported, citing a source in the state gas industry.
The emirate was hoping to secure a deal for Iraqi gas to start being delivered within the next 12 to 18 months, the official said.
"It is likely that the Kuwaitis have approached Shell, which is in the final stages of negotiating an associated gas-gathering and monetisation joint venture with state-owned South Gas Company in Iraq and Japan's Mitsubishi," said Samuel Ciszuk, the senior Middle East energy analyst at IHS Global Insight.
The much delayed Shell-led venture would gather large gas volumes produced from southern Iraq's big oilfields. The gas there is now being flared, or burnt off.
The priority use for the gas is to fuel Iraq's electricity sector but surplus may be available for export in the first few years of the project while power plants are built.
Shell has suggested temporary exports through a proposed floating LNG terminal it could build within 18 months of signing a contract.
"The Iraqis and Shell might in the end prefer the flexibility of LNG over piping gas to Kuwait," Mr Ciszuk suggested.
At an oil and gas summit in Kuwait last week, Mohammed Hussain, the deputy chairman of Kuwait Oil Company (KOC), said gas supply had become a critical issue for Kuwait and KOC had a long-term plan to nearly quadruple gas output to 4 billion cubic feet a day by 2030.
But LNG imports to Kuwait, which began in 2009, would continue to be needed for some time before the emirate could sufficiently boost its domestic gas output, said Hashim al Rifai, the managing director of planning at Kuwait Petroleum Corporation, the parent of KOC.
The imports have come from as far away as Sakhalin Island in Russia.
Some of the additions to Kuwait's domestic gas output are expected to be associated with increased oil production.
But the emirate faces an uphill battle to develop its marginal oil resources and refurbish large oilfields that were badly damaged in the First Gulf War.