Kuwait's Burgan Oil Field, World's 2nd Largest, Is `Exhausted'
The Oil Drum | Comments | ASPO-USA Denver Conference Report (Thursday): "Kuwait's Burgan Oil Field, World's 2nd Largest, Is `Exhausted' "
2005-11-10 03:29 (New York)
By James Cordahi and Andy Critchlow
Nov. 9 (Bloomberg) -- Kuwaiti oil production from the world's
second-largest field is ``exhausted'' and falling after almost six
decades of pumping, forcing the government to increase spending on
new deposits, the chairman of the state oil company said.
The plateau in output from the Burgan field will be about 1.7
million barrels a day, rather than as much as the 2 million a day
that engineers had forecast could be maintained for the rest of
the field's 30 to 40 years of life, said Farouk al-Zanki, chairman
of state-owned Kuwait Oil Co. Kuwait plans to spend about $3
billion annually for the next three years to expand output and
exports, three times the recent average.
To boost oil supplies, ``Burgan by itself won't be enough
because we've exhausted that, with its production capability now
much lower than what it used to be,'' al-Zanki said during an
interview in his office in Ahmadi, 20 kilometers south of Kuwait
City. ``We tried 2 million barrels a day, we tried 1.9 million,
but 1.7 million is the optimum rate for the facilities and for
economics.''
Persian Gulf oil producers, which supply about a fifth of
world demand, are rushing to find new reserves and build more
pipelines and export terminals to compensate for declining output
from older reservoirs. Any delay in replacing supplies may push
oil prices higher and slow economic growth, the International
Energy Agency said in a report this week.
To be sure, the plateau in supply if achieved would be higher
than a projection from the IEA. This week the Paris-based group
said output from the Greater Burgan area will increase from 1.35
million barrels a day in 2004 to 1.64 million a day in 2020,
before falling to 1.53 million a day in 2030. The field now pumps
between 1.3 million and 1.7 million barrels a day, al-Zanki said.
Sustainable Supply?
The debate over the sustainability of Middle East oil
supplies has gained pace this year, after investment banker
Matthew Simmons published ``Twilight in the Desert: The Coming
Saudi Oil Shock and the World Economy.'' In the book, he asserted
the practice of injecting water into Saudi fields may lead to
rapid production declines. Saudi officials rejected the charge.
Brought into production in 1948, Burgan accounts for more
than half of Kuwait's 96.5 billion barrels of oil reserves, or 55
billion barrels. Only Saudi Arabia's Ghawar oilfield, about 500
kilometers (313 miles) to the south, is bigger.
Benchmark New York oil futures have tripled in price during
the last four years to a record $70.85 on Aug. 30 because
countries such as Kuwait and Saudi Arabia haven't invested enough
in expanding production capacity to keep pace with faster-than-
expected demand from countries such as China, India and the U.S.
Kuwait last month pumped 2.5 million barrels a day,
equivalent to 3 percent of global demand, according to Bloomberg
data. That's down from a peak of almost 3 million barrels a day in
1972, according the Arab Oil & Gas directory.
``Kuwait's oil industry requires significant investment and
needs international oil companies to help kick-start production
capacity increases,'' Colin Lothian, senior Middle East energy
analyst at Wood MacKenzie Ltd., an Edinburgh-based oil industry
consultant, said in a telephone interview.
Burgan on its own had enough reserves to support 2 million or
3 million barrels of daily output, but those have already been
produced, al-Zanki said in the interview two days ago. The
reserves are declining and need to supplemented with other
reservoirs, he said.
Revival Targeted
The family-ruled emirate plans to increase production
capacity by about 18 percent to 3 million barrels a day by the end
of the decade from about 2.55 million now, and to at least 4
million by 2020.
Oil consumers will be more reliant on Middle Eastern supplies
in coming years and vulnerable to higher prices and slower
economic growth should investments be delayed, the IEA, an adviser
to 26 consuming nations, said in an annual outlook released on
Nov. 7.
Petrofac Ltd. and rivals SK Engineering & Construction Co.
won two contracts worth in more than $1.6 billion this year to
upgrade and refurbish 20 plants that separate natural gas from oil
ready for export in northwestern Kuwait. That works is in
preparation to allow international oil companies to develop four
oil fields near the border with Iraq.
``You need to develop more reserves in order to support the
future target,'' said al-Zanki, who was appointed Kuwait Oil's
chairman last year. Kuwait Oil is the country's state-owned
monopoly oil and gas producer.
In a 10-year-old plan known as Project Kuwait, the emirate
may invite companies such as Exxon Mobil Corp., Royal Dutch Shell
Plc and BP Plc to invest about $8.5 billion to almost double
output at the emirate's northern fields to 900,000 barrels a day
by 2025. The project would be the first time since the 1970s that
foreign companies operate Kuwaiti oilfields.
--------------------------------------------------------
From "The World's Giant Oilfields" (written several years ago by Matt Simmons):
"Kuwait has eight producing oilfields. Its giant Burgan field, discovered in 1938 still accounts for the majority of Kuwait's total production which averaged almost two million barrels per day in 2000. The Greater Burgan area has three distinct structures including Burgan, Magwa and Ahmadi. This was where most of the Kuwaiti wellheads were blown off when the Iraqi's departed Kuwait in 1991. According to reports at the time, the individual wells were producing just over 4,000 barrels per well until the high-pressure wellheads were blown off. Without wellheads, these wells were letting over 20,000 barrels per day escape into the atmosphere until the fires could be put out and the wells re-capped. How many years of flush, choked back production this cost Kuwait will never be known but it is one reason why many now think Burgan has peaked and is in decline."
2005-11-10 03:29 (New York)
By James Cordahi and Andy Critchlow
Nov. 9 (Bloomberg) -- Kuwaiti oil production from the world's
second-largest field is ``exhausted'' and falling after almost six
decades of pumping, forcing the government to increase spending on
new deposits, the chairman of the state oil company said.
The plateau in output from the Burgan field will be about 1.7
million barrels a day, rather than as much as the 2 million a day
that engineers had forecast could be maintained for the rest of
the field's 30 to 40 years of life, said Farouk al-Zanki, chairman
of state-owned Kuwait Oil Co. Kuwait plans to spend about $3
billion annually for the next three years to expand output and
exports, three times the recent average.
To boost oil supplies, ``Burgan by itself won't be enough
because we've exhausted that, with its production capability now
much lower than what it used to be,'' al-Zanki said during an
interview in his office in Ahmadi, 20 kilometers south of Kuwait
City. ``We tried 2 million barrels a day, we tried 1.9 million,
but 1.7 million is the optimum rate for the facilities and for
economics.''
Persian Gulf oil producers, which supply about a fifth of
world demand, are rushing to find new reserves and build more
pipelines and export terminals to compensate for declining output
from older reservoirs. Any delay in replacing supplies may push
oil prices higher and slow economic growth, the International
Energy Agency said in a report this week.
To be sure, the plateau in supply if achieved would be higher
than a projection from the IEA. This week the Paris-based group
said output from the Greater Burgan area will increase from 1.35
million barrels a day in 2004 to 1.64 million a day in 2020,
before falling to 1.53 million a day in 2030. The field now pumps
between 1.3 million and 1.7 million barrels a day, al-Zanki said.
Sustainable Supply?
The debate over the sustainability of Middle East oil
supplies has gained pace this year, after investment banker
Matthew Simmons published ``Twilight in the Desert: The Coming
Saudi Oil Shock and the World Economy.'' In the book, he asserted
the practice of injecting water into Saudi fields may lead to
rapid production declines. Saudi officials rejected the charge.
Brought into production in 1948, Burgan accounts for more
than half of Kuwait's 96.5 billion barrels of oil reserves, or 55
billion barrels. Only Saudi Arabia's Ghawar oilfield, about 500
kilometers (313 miles) to the south, is bigger.
Benchmark New York oil futures have tripled in price during
the last four years to a record $70.85 on Aug. 30 because
countries such as Kuwait and Saudi Arabia haven't invested enough
in expanding production capacity to keep pace with faster-than-
expected demand from countries such as China, India and the U.S.
Kuwait last month pumped 2.5 million barrels a day,
equivalent to 3 percent of global demand, according to Bloomberg
data. That's down from a peak of almost 3 million barrels a day in
1972, according the Arab Oil & Gas directory.
``Kuwait's oil industry requires significant investment and
needs international oil companies to help kick-start production
capacity increases,'' Colin Lothian, senior Middle East energy
analyst at Wood MacKenzie Ltd., an Edinburgh-based oil industry
consultant, said in a telephone interview.
Burgan on its own had enough reserves to support 2 million or
3 million barrels of daily output, but those have already been
produced, al-Zanki said in the interview two days ago. The
reserves are declining and need to supplemented with other
reservoirs, he said.
Revival Targeted
The family-ruled emirate plans to increase production
capacity by about 18 percent to 3 million barrels a day by the end
of the decade from about 2.55 million now, and to at least 4
million by 2020.
Oil consumers will be more reliant on Middle Eastern supplies
in coming years and vulnerable to higher prices and slower
economic growth should investments be delayed, the IEA, an adviser
to 26 consuming nations, said in an annual outlook released on
Nov. 7.
Petrofac Ltd. and rivals SK Engineering & Construction Co.
won two contracts worth in more than $1.6 billion this year to
upgrade and refurbish 20 plants that separate natural gas from oil
ready for export in northwestern Kuwait. That works is in
preparation to allow international oil companies to develop four
oil fields near the border with Iraq.
``You need to develop more reserves in order to support the
future target,'' said al-Zanki, who was appointed Kuwait Oil's
chairman last year. Kuwait Oil is the country's state-owned
monopoly oil and gas producer.
In a 10-year-old plan known as Project Kuwait, the emirate
may invite companies such as Exxon Mobil Corp., Royal Dutch Shell
Plc and BP Plc to invest about $8.5 billion to almost double
output at the emirate's northern fields to 900,000 barrels a day
by 2025. The project would be the first time since the 1970s that
foreign companies operate Kuwaiti oilfields.
--------------------------------------------------------
From "The World's Giant Oilfields" (written several years ago by Matt Simmons):
"Kuwait has eight producing oilfields. Its giant Burgan field, discovered in 1938 still accounts for the majority of Kuwait's total production which averaged almost two million barrels per day in 2000. The Greater Burgan area has three distinct structures including Burgan, Magwa and Ahmadi. This was where most of the Kuwaiti wellheads were blown off when the Iraqi's departed Kuwait in 1991. According to reports at the time, the individual wells were producing just over 4,000 barrels per well until the high-pressure wellheads were blown off. Without wellheads, these wells were letting over 20,000 barrels per day escape into the atmosphere until the fires could be put out and the wells re-capped. How many years of flush, choked back production this cost Kuwait will never be known but it is one reason why many now think Burgan has peaked and is in decline."
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