Kuwait’s Big New Offshore Oil Find

Unlike its prolific onshore, Kuwait’s offshore had long been a desert for oil and gas. Now the country has changed that, reporting a large discovery at the Al-Nokhatha field, named for the captain of a dhow, the traditional Gulf ship. How useful is this for the country, and does it herald a turnaround in Kuwaiti petroleum?

Kuwait has sought to explore its offshore for a long time. Shell and Kuwait Oil Company, the national oil corporation, drilled some wells in the 1960s and KOC some more in the 1980s. Large discoveries had been made in the offshore section of the Saudi-Kuwaiti Partitioned Neutral Zone, partly disputed with Iran, including the significant Dorra gas field, which remains undeveloped due to the border dispute.

But the wells in Kuwait’s own offshore sector made only some small, noncommercial oil discoveries. It appeared that the geological structure was essentially an unstructured monocline – i.e., the sediments dip deeper uniformly toward the east, providing no major traps to hold oil and gas accumulations.

Kuwait’s oil was fully nationalized by 1975, and its constitution forbids the foreign ownership of oil resources. With low oil prices and deep production cuts in the 1980s and 1990s, Kuwait’s giant onshore workhorse fields were more than adequate.

Further studies of the offshore were conducted in the late 1990s, as Kuwait, like neighbors Iran and Saudi Arabia, thought the market might finally demand an increase in its production and sought help from international oil companies to do so. Kuwait passed a law in 2001 that would have permitted some limited foreign involvement.

But attention turned instead to more exploration onshore, in the less-studied western area of Kuwait and in deep reservoirs under the main producing fields. These turned up large quantities of light oil and gas but in very technically challenging Jurassic formations, with high pressure and significant levels of the toxic, corrosive gas hydrogen sulfide. Development has progressed only slowly, despite Kuwait’s need for gas.

In 2013 and 2014, China’s BGP was contracted to provide new seismic data across the offshore area, the standard petroleum industry method of using sound waves to map the subsurface structure. Offshore drilling plans were held up in 2018 because of difficulties in securing a port slot. U.S. oilfield services giant Halliburton was awarded a contract to manage the drilling of six offshore wells in July 2019, intending to start in mid-2020. These six wells were described as high pressure and high temperature, suggesting they would explore deep formations. KOC finally brought in its first offshore rig for many years in mid-2022, provided by China Oilfield Services Limited, a subsidiary of China National Offshore Oil Corporation, one of the country’s three leading state oil companies.

Finally, on July 14, Kuwait Petroleum Corporation, the parent of KOC, announced a discovery, via a social media video from its CEO, Nawaf Al-Sabah. The Al-Nokhatha discovery is located roughly 45 miles east of the small island of Failaka and close to the undemarcated maritime boundary with Iran. It was made in the Minagish Formation, a layer of limestone of Early Cretaceous age, and a well-known producing reservoir in south Kuwait and the Neutral Zone. The rig has now moved to drill another well to the south, near one of the small discoveries from the 1960s, and a second rig that arrived in late 2023 is drilling near another old find.

The new field is reported to have reserves of 2.1 billion barrels of light oil and 5.1 trillion cubic feet of gas, and the well tested at a respectable 2,800 barrels of oil per day and 7 million cubic feet of gas per day. The reserves figures may be revised upward as evaluation continues.

As they stand, the reported reserves compare to Kuwait’s 101.5 billion barrels of oil and 59.9 trillion cubic feet of gas. Although 5.1 trillion cubic feet equates to about 860 million barrels of oil in energy content, the gas is relatively more important to Kuwait than the oil. The ratio suggests that a large part of the reserves must be free gas (not dissolved in the oil) and could probably be produced independently. It is reported to have low levels of hydrogen sulfide and carbon dioxide.

Kuwait could certainly use more oil. Its main problem, though, has not been reserves but developing what it has. Current production is about 2.4 million barrels per day. Its baseline production under the OPEC+ deal is 2.676 mb/d, and its allowable level would reach 2.548 mb/d starting in October 2025. Capacity, including (probably overoptimistic) figures for its share of the Neutral Zone, is quoted at 2.9 mb/d.

It seeks to boost this to 3.2 mb/d by the end of this year, and 4 mb/d by 2035, but these targets have been missed many times. To increase or even maintain stable production levels, declines in mature onshore fields need to be compensated with new projects, especially if OPEC+ is able to raise production targets over the next few years. In this case, it would be crucial for Kuwait to demonstrate higher capacity to secure a larger allocation, as the United Arab Emirates has done. Offshore developments might start production around 2030. Light oil from Al-Nokhatha will be preferable to boosting output from the large but costly, high-carbon resources of onshore heavy oil, where production has risen only slowly since it began in 2018.

The gas is more important, though. Unlike its Gulf neighbors, Kuwait has little free gas, other than the difficult Jurassic resources. Associated gas production, which comes up with the oil, is too limited to meet domestic demand and subject to the vagaries of OPEC+ targets: In 2023, it consumed 2.2 billion cubic feet per day versus only 1.3 billion cubic feet of domestic output. Instead, Kuwait burns polluting heavy fuel oil and imports costly liquefied natural gas. It accounts for 90% of total LNG imports by the Middle East and Africa. Fast-growing electricity consumption has forced a few hours of power cuts in several areas already this summer.

On a rough estimate, gas from Al-Nokhatha could eliminate most fuel oil consumption or replace most LNG imports, depending on which Kuwait prioritizes.

But two challenges stand in the way. First is the border. Nawaf Al-Sabah has spoken encouragingly of progress on the long-awaited Dorra field, possibly starting development by the end of the year with the aim to begin production in 2029. But while plans have been agreed on with Saudi Arabia, there is still no accord with Iran. Al-Nokhatha could be pulled into this debate. Iraq too objects that the drilling is close to its offshore territory, also with disputed boundaries. In September 2023, the Supreme Court in Baghdad ruled that Iraq’s ratification of a 2012 navigation accord* with Kuwait was unconstitutional, a move that might have been timed to lend support to Tehran over Dorra.

Second, Kuwait has long struggled to advance major projects due to political wrangling, expressed most vividly in, but not confined to, the Parliament. In May, Emir Meshal al-Ahmed al-Jaber al-Sabah, who came to power in December 2023, suspended Parliament for a “period not exceeding four years.” While raising concerns about the future of Kuwaiti democracy, the suspension does give the emir the chance to show that key investments can finally sail ahead. The speedy development of Al-Nokhatha and any other new offshore fields could be the flagship.

*Correction: This piece originally incorrectly referred to the 2012 agreement as a border accord.

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