Hydrocarbon Industry And Energy Transition In Kuwait

Reconnaissance Research organized a special panel discussion with Alexandre LAVELLE, the international expert in energy policy, the petroleum industry’s performance and its impact on the Gulf States prosperity.

A number of distinguished special invitees from different economic and diplomatic sectors attended the discussion. The dialogue, which was moderated by the Founder and CEO of the center, Abdulaziz Al-Anjeri, focused on the different carbon net-zero emissions plans that necessitate a paradigm shift in Middle Eastern energy agendas to reduce the dependence on hydrocarbon consumption to grow States revenues. As well as a main focus on Kuwait.

What is the future of Kuwait’s hydrocarbon industry?

Kuwait’s hydrocarbon industry’s resilience relies on its ability to deliver a national vision for its energy future. Today, the country is navigating the shifting sands of its new energy chapter. It will require a common agenda from all stakeholders across Kuwait to shape a shared roadmap spanning four main themes:

From oil to energy: The company of the future is an integrated energy company able to profitably materialize the energy transition and its structural impact on supply, demand, energy mix and prices, leveraging the entire oil and gas (O&G) value chain. The company of the future has to be shaped considering the reservoirs’ potential, the infrastructures’ performance, the capability requirements, the partnership strategy, the energy efficiency gains and carbon neutrality norms.

From volumes to margins: The oil chain integration is the shift from an oil volume-driven company to an energy margin-driven company. Deploying the integrated national oil company (NOC) setup, looking for cost reductions, economies of scale and the agile continuity of Kuwait’s hydrocarbon chain.

From O&G coordination to energy convergence: The energy vision is based on aligning energy stakeholders through a common energy agenda to secure the continuity of the energy value chain through coordination. Gas will play a pivotal role in the energy convergence as a transitory fuel able to address the energy diversification challenges in the context of global climate standards. Today, gas represents more than 50 percent of Kuwait’s energy mix and is expected to contribute to a larger share in the future through domestic gas production and Liquified Natural Gas (LNG) imports. Gas will transform Kuwait’s energy landscape by converging the energy value chains to achieve the optimal balance between affordable, reliable and sustainable energy.

From carbon intensity to carbon neutrality: Energy sustainability is setting the foundation of the Intended Nationally Determined Contributions (INDC) to meet net-zero carbon emissions by 2060 through managing the domestic carbon dioxide value chain to meet net-zero emission targets. Energy sustainability requires reducing scopes one and two emissions through green electrification, carbon capture systems and carbon offset.

What is the impact of this future on Gulf States economies?

The next phase of the energy transition is critical to the Gulf States prosperity and their hydrocarbon contributions. They will face the dual and contradictory goal of supplying a sustained demand for hydrocarbons while reducing carbon emissions.

There is immense pressure on the hydrocarbon industry from the international community to decrease carbon emissions through: (I) accelerating the deployment of low-carbon technologies, (II) supporting carbon policies and regulations, (III) increasing the renewables share from the energy mix.

The energy transition is an inevitable shift to the traditional O&G companies’ narrative, but each country will have to craft its roadmap given its specific operating conditions. The GCC NOCs have acknowledged the impact of the energy transition on the global energy landscape and their region.

The O&G production curve needs to be sustained through capital investments in infrastructure, new oil and gas development projects, and a unified energy transition pattern at the GCC scale. This blueprint must federate the Gulf countries around a common trajectory to strengthen the global positioning of the region. As per the 42nd GCC summit outcome, each Gulf country should contribute to a common pattern (standards, converging objectives and roadmap) that can form a regional electricity grid/ gas network. This is the first cornerstone in promoting a greener region.

The State should allocate investment funds for NOCs to extend field lifecycles. Maturity challenges are naturally on the rise due to +70 years of exploitation. You have the example of Saudi Aramco promoting technological investments across the value chain and power generation using venture capital models. Saudi Aramco’s energy ventures have been significantly investing in start-ups to reshape the energy industry and accelerate O&G development in the Kingdom of Saudi Arabia.

Can you portray Kuwait’s hydrocarbon industry challenges?

First, is the field maturity turning point. It is the inflection point in the oil fields’ lifecycle due to years of exploitation and changes in reservoir conditions requiring continuous intervention to sustain and extend the life of the fields.

Second, is the potential for integration. The need for a common approach to measure the performance of the energy industry’s segments through an integrated energy chain. Integrating oil, gas and electricity in harmony is the first step to treat Kuwait’s energy system as one.

Third, is the pressure from net-zero targets. The country is defining its strategy to achieve the ambitious climate targets. Kuwait has announced plans to integrate 15 percent of renewables into the energy mix. The heavy dependence on hydrocarbons coupled with Kuwait’s appetite for energy requires an efficient approach to hydrocarbons consumption with a holistic strategy for electrification

Fourth, is the national champions’ scarcity. Grooming future leaders is essential for Kuwait’s sustainability. Stakeholder management is a significant element that must be addressed. It will require a new generation of leaders who are able to anticipate future energy sector challenges.

Where does Kuwait stand in the energy transition?

Kuwait is at the nascent stage of the energy transition journey. It needs to sketch an energy roadmap tailored to address the rising challenges of the hydrocarbon industry, from field maturity challenges to securing financial investments. The energy transition for Kuwait stems from strengthening the petroleum industry and then extending it to low-carbon technology deployment to match global climate expectations.

The objective of Kuwait’s energy transition should be to make its energy production (mostly oil, from exploration prospects to chemical products) a sustainable and profitable industry leveraging its low-cost oil advantage. The energy transition must also strengthen Kuwait’s business integration, capture value across the entire value chain, and maintain competitiveness as a low-cost and efficient operator.

How to support Kuwait’s energy transition strategy?

Kuwait needs to support growth in financing business prosperity. How? In creating new industrial domains attracting capital deployment. For instance, the hydrocarbon industry should build its power generation capabilities, using solar energy as an alternative to diesel consumption and the national grid supply. Public-Private Partnerships will be the basis for improving the energy value chain efficiency: the private sector creates solar power plants while the national operators commit to buying electricity at a profitable price.

Energy market growth: Promoting industry sustainability through private sector and investors participation

Redirecting focus of current private sector tenders towards energy efficiency, carbon neutrality, low-carbon technologies and cost reduction.

Formalizing new Public Private Partnerships to power energy sector operations and improve energy efficiency.

Financial markets participation: Attracting local and international financial institutions to project-specific opportunities

Securing investments to enhance private sector participation across targeted energy efficiency themes across the O&G value chain.

Leveraging the industry’s credit rating to finance energy efficiency opportunities beyond private sector reach.

The alternative energy sources should be integrated into one converging energy chain. Anticipating the energy system evolution and convergence with other value chains (…) to achieve an optimal balance between economy, security, and sustainability. However, according to Thunder Said Energy, a leading energy technology research company, this will not be a walk in the park, given that every $1 divested in fossil fuels should be replaced with $25 in renewable energy sources.

Two main components to be considered when answering this question: Consumption side: Kuwait needs to address local energy demands and identify new energy sources to minimize consumption of O&G.

Export side: Securing the maximum amount of oil exports to support State revenues without jeopardizing the hydrocarbon reservoirs.

 

SOURCE   :   TIMES KUWAIT

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