Is Kuwait going to jump on the shale bandwagon?
Kuwait has announced it is conducting studies into the viability of extracting shale gas from recently identified reserves, although any commercial operation will likely be many years off.
Despite its extensive natural gas reserves – estimated to be around 1.8trn cu metres – Kuwait is a net importer of the hydrocarbon. This is due in part to growing demand for electricity, which rises by about 6-8% each year, according to the Ministry of Electricity and Water. Planned industrial expansion, including in the gas-hungry downstream petrochemicals sector, will add to the draw upon resources, Global Arab Network reports according to OBG.
A report prepared by online sectoral publisher Oilprice.com in mid-April said Kuwait’s shale gas potential had only recently come into focus, due to the past concentration on conventional oil reserves. Although the report noted that data on the extent of the shale gas reserves were limited at best, it cited geologists as saying initial studies indicated substantial resources both on- and off-shore.
In March 2013, Sami Al Rushaid, chairman and managing director of the state-owned Kuwait Oil Company (KOC), announced that the firm had identified a commercially viable shale gas deposit. KOC will soon be moving to develop the resource, Al Rushaid told a conference in Bahrain on March 10, but he did not give details as to the extent of the field, or when development work would begin.
Al Rushaid’s comments were further reinforced by remarks made by a senior Kuwaiti oil official in April to news agency Reuters. The official indicated that proposals to extract shale gas from fields in the north of the country were being reviewed. The extraction process will likely be difficult due to the complexity of the reservoir, but the use of advanced technology could allow daily production of 4.25m-5.6m cu metres of gas.
If the production level referred to in the Reuters article can be achieved, it could eliminate the need to import gas to feed Kuwait’s electricity sector. By converting more of its power plants to gas, and using domestically sourced product, the country could free up much of the 300,000 barrels of oil per day it uses to fire its power plants. This could, in turn, generate around $11bn in new revenue at current prices, as well as potentially prolonging the life of the oilfields.
To unlock this potential, and the reserves of shale gas, Kuwait would likely have to partner with foreign operators. The country does not have the experience or the technology to develop its shale gas fields, independent energy analyst Kamil Al Harami told Bloomberg news agency in March. Kuwait will also have to set a time table for its unconventional gas programme and keep to it if it wants to benefit from its resources, Al Harami said.
“If the Kuwaitis don’t specify a deadline for the project and don’t seek help from international companies, then their plans to develop the shale and sour gas deposits are just daydreams,” he said.
While the plans to develop Kuwait’s shale gas deposits hold promise for the economy, there is also a potential downside, as there are concerns over the technology required to tap these reserves. Most shale gas is extracted by hydraulic fracking, which involves pumping large amounts of water, combined with sand and at times explosives, underground at high pressure. Although effective, the process can damage underground aquifers, putting domestic water supplies at risk, a very real concern for country with limited water resources, such as Kuwait. If salt water were used in the process, the potential for contamination of aquifers would be high, while using fresh water, possibly generated from desalination plants, could make extraction financially unviable.
Newer technology, such as using gelled propane instead of water, or nitrogen foam mixed with the fracking fluid, is being tested and could reduce the amount of water required for the process, but it will likely be some time before such options are available, if proven successful and environmentally safe.
Kuwait has time to weigh its options, and many of its conventional gas fields have yet to be fully developed. In the meantime, Kuwait can afford to wait until shale gas extraction and processing technology becomes cheaper, as economies of scale bring down the price. This will also allow time for the country to more accurately assess reserves and plan how best to use the new resource.
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