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By WAEL MAHDI

Kuwait, the third-largest producer in OPEC, plans to spend about $7 billion to develop heavy-oil fields even with crude prices near five-year lows.

The first phase of the Lower Fars heavy-oil project will cost $4.2 billion, with contracts to be awarded by the end of this year, Hashem Hashem, CEO of state-owned Kuwait Oil Co., said today at a conference in Kuwait City. 

KOC, which plans to drill 900 wells and pump 60,000 bpd by 2018 in the project’s first phase, targets output of 180,000 bpd by 2025 and 270,000 by 2030, Hashem said.

“Developing heavy oil projects in Kuwait is economical even with the current fall in oil prices,” he said. Production from Lower Fars and the Ratqa field “will open the door for development of other heavy oil fields in Kuwait.”

The Persian Gulf country ranked third for output, along with the United Arab Emirates, among the 12 members of the Organization of Petroleum Exporting Countries, according to data compiled by Bloomberg. Kuwait can pump as much as 3.25 million bpd of crude, data compiled by Bloomberg show. The government plans to raise capacity to 4 million bbl by 2020.

Brent crude, a pricing benchmark for more than half of the world’s oil, has tumbled 41% from its June 19 peak this year as global production, boosted by US shale output, outpaces demand. Brent fell 57 cents to $69.07 on Dec. 5, the lowest closing price since October 2009, and was at $67.02/bbl at 12:30 p.m. in London.

Nizar Al-Adsani, CEO of state-run Kuwait Petroleum Corp., estimated that oil will trade at about $65 for six months. Kuwait is pumping 2.9 million bpd, he said at the same conference.

Kuwait, like neighboring Saudi Arabia and the UAE, wants to boost output of refined fuels to supply its domestic market and also to export. Refined products can fetch a higher price on international markets than raw crude.

Kuwait National Petroleum Corp. plans to expand its refining capacity to 1.4 million bpd from 937,000 bpd, Mohammad Ghazi Al-Mutairi, the company’s CEO, said today at the conference. State-run KNPC will reach this target when it completes the country’s fourth and biggest refinery, the 615,000 bpd Al-Zour facility, and upgrades existing plants to produce clean fuel, he said.

Crude density is becoming heavier in the Middle East, and refineries must be improved to process it, Al-Mutairi said. Kuwait’s heavy-oil has an American Petroleum Institute crude gravity of 12 to 20 degrees. That shows it is a very heavy crude.

Al-Zour will be able to process all of Kuwait’s heavy crude, he said. Lighter crude is generally more valuable than heavier varieties because it more readily yields high-value products such as gasoline.

Bids on Al-Zour will close next month and commercial operation is expected by mid-2019, Al-Mutairi said.