GAS shortage has over the past two years forced Kuwait to import LNG during the hottest months of the year, when air conditioning use is high, leading to very high per capita power consumption.
Talks with Iraq have again been initiated by Kuwait in order to try to secure gas imports, according to reports in regional media, although this time not with the government, but with private actors in the south of the country.
“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”, a Kuwaiti state gas industry source was quoted as telling Kuwaiti daily Al Jarida, adding that the emirate was hoping to secure a deal for Iraqi gas to start being delivered within the next 12 to 18 months.
There were, however, no reports on which companies the Kuwaitis have approached, nor on what kind of gas volumes were being discussed. Kuwait has suffered domestic gas shortages throughout the past decade, suffering rolling blackouts during the peak demand summer months, forcing it to burn increasing amounts of refined products in its power plants, eating directly into its prospective export revenues.
The gas shortage has over the past two years forced Kuwait to import LNG during the hottest months of the year, when air conditioning use is high, leading to very high per capita power consumption. 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.
The much-delayed deal would gather gas, large volumes of which currently are being flared, produced alongside oil at some of southern Iraq’s main oil fields and then grow its gathering and treatment operations gradually as the IOCs developing the oil fields raise oil production significantly over the coming six years.
The gas is earmarked firstly for domestic use, however, Iraq’s own power sector is so shattered and far from being comprehensibly rebuilt that there would an overcapacity in the south if all simultaneous projects proceed as planned during most of the coming five to six years, so there is likely to be significant surplus at the end of the oil and gas field development. Shell has been talking about exporting this gas through a floating LNG facility starting relatively soon after a contract is signed – potentially within the 12 to 18 month timeframe – however, the Iraqi’s and Shell might in the end prefer the flexibility of LNG over piping gas to Kuwait.
Another possibility could be that the Kuwaitis are hoping to revive plans to import gas from the Siba gas field close to the Kuwaiti border, although Iraq repeatedly has said that it plans to use that output as local power feedstock, with southern power plants likely being planned to use Siba gas relatively soon.
The development of Siba was last year awarded to a consortium of independent Kuwait Energy Company (KEC; 60 per cent) and Turkey’s TPAO (40 per cent), which also could make negotiations easier despite earlier Iraqi decisions.
