Kuwait May Link Rate of Oil Production to Level of Oil Reserves
27 July 2006
Dar Al Hayat. Kuwait’s parliament is considering a bill that would link the rate of oil production to the assessed amount of the country’s crude oil reserves.
The proposal came after Petroleum Intelligence Weekly published a report suggesting that Kuwait’s oil reserves were only 48 billion barrels—less than half the claimed volume of 100 billion barrels.
Earlier in July, Kuwait’s Oil Minister Sheikh Ali Al Jarah Al Sabah said that the country would clarify its actual oil reserves.
...is a very significant matter and soon the volume and truth of oil reserves will be announced based on clear scientific studies, characterized by reality and credibility, and supported by international documents and certificates.—Sheikh Ali Al Jarah Al Sabah
Given the uncertainty over the reserves, And in the absence of the verification promised by the Ministry of Oil, ten members of the Kuwait National Assembly proposed the new measure in an attempt to ensure an appropriate level of production designed to maximize the life of the resource.
If the bill is approved, Kuwait will become the first oil state to regulate oil production based the state of oil reserves.
To further simplify the equation, the current rate of Kuwait’s oil production has stood at 2.65 million barrels per day for two consecutive years. If we assume that the current oil reserve is 100 billion barrels, and that any change in oil reserve, for example, drops to 85 billion barrels, Kuwait’s production will be reduced, and the Ministry of Energy will therefore have to reduce the output to 2.25 million barrels per day instead of 2.65 million.
The proposal specifies the mechanisms and the responsibilities of the Ministry of Energy to provide the National Assembly, the Cabinet, and the SAB of Kuwait with the dates for sending the data, the timetables of the reserve of every field and reservoir. Furthermore, the ministry will be committed to reporting any discoveries or new fields and reservoirs annually, two months after the end of the fiscal year.
The biggest technical and political challenges will be the agreed-upon calculation of reserves, and the explanation of discrepancies.
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