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Kuwait Times: Economists urge Kuwait to come clean on oil reserves

Kuwait Times; Apr 15, 2006

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KUWAIT: Independent economists yesterday urged Kuwait's state-run oil industry to come clean on the extent of its proven oil reserves as oil accounts for about 80 per cent of the nation's income. Economists made the call after speculation earlier this year that Kuwaiti reserves could actually be only half their current estimated 97 billion barrels.

“It is now time for Kuwait to announce the correct figures of its oil reserves,” said Al-Shall Economic Consultants in their weekly report yesterday. The last official figure released by Kuwait on its reserves was in May 2005 when state-owned Kuwait Oil Company (KOC) revised upwards crude oil reserves to 97.3 billion barrels, which was an increase of some 818 million barrels.

In March, KOC announced newly discovered hydrocarbon finds of at least 35 trillion cubic feet of natural gas and between 10 and 13 billion barrels of light crude in northern Kuwaiti fields. When announcing that discovery, Kuwait's Energy Minster Sheikh Ahmed Fahd Al-Sabah, estimated that the find would likely increase Kuwaiti oil reserves by almost 10 per cent over the 97.3 billion barrel figure.

However, last January the US-based energy publication Petroleum Intelligence Weekly (PIW) reported that according to a leaked KOC memo, which it had obtained, Kuwait's proven estimated oil reserves were actually closer to 48 billion barrels, and not 97 billion.

PIW and other oil analysts have also pointed to what they call the “past-peak” production stage of the vast Burgan oil field, the second largest in the world, which has been Kuwait's breadbasket for the past 50 years.

Meanwhile, Sheikh Ahmed said the PIW report was based on incomplete information, and KOC stands by its reserves figure announced in 2005. On March 7, the minister told reporters that the PIW report was based on KOC's development of 31 fields, and not the country's total 105 fields, which would not include the new finds in the north. “We believe they (PIW) don't have the full picture,” Sheikh Ahmed said.

Al-Shall cited a drastic miscalculation by oil giant Royal Dutch/Shell in 2004 when the company overestimated its crude reserves by 24 per cent, an act that impacted the company's share price.

The consultancy said a similar miscalculation by Kuwait would be catastrophic for the nation. “The matter is different when a similar situation pertains to a country who owns nothing but oil, and has not developed any substitutes for its source of income or quality of services for over 60 years,” it said. “If it proves that some of our oil sector is lying with regards to oil reserves, we should act in two parallel lines. First every contributor to this dangerous lie, from the outset should be held politically and criminally liable; second, Kuwait development strategy should be substantially changed,” Al-Shall warned.

Oil analysts in Kuwait have predicted that state oil officials plan to present new oil reserve estimates soon, and that an increase would reflect the new finds in the northern fields. Kuwait has a current oil production capacity of 2.6 million barrels per day and has a target to increase that capacity production to 4 million barrels per day by 2020. The state earned an estimated $45bn in oil sales during the 2005-06 fiscal year that ended on March 31. – dpa

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