KUWAIT CITY — Kuwait is delaying by a decade plans to boost its output capacity to four million barrels per day because of weakness in the market, its oil minister said Tuesday in an indication of the challenges confronting the OPEC member that sits atop 10 per cent of the world’s proven crude reserves.
Sheik Ahmed Al Abdullah Al Sabah also told reporters that the Organization of the Petroleum Exporting Countries was unlikely to change its output quotas when the group meets in Angola in December.
“This year, no way,” he said.
OPEC left its quota target unchanged during its meeting last month, citing an oversupply of crude on the market and concerns about disrupting the nascent stages of a global economic recovery following the world’s worst recession in over six decades.
The global meltdown hammered world oil markets, driving prices down almost $150 per barrel in mid-2008 to US$30 at the end of last year before they staged a rebound as OPEC put into effect a 4.2 million barrel per day output cut from September 2008 levels.
The meltdown also hurt OPEC members, cutting their revenues and prompting some to delay or scrap projects.
The decision to delay Kuwait’s capacity expansion appears to be at least indirectly linked to those factors.
“A good workforce is scarce . . . and the market is weak,” Sheik Ahmed said of the decision to push back capacity expansion plans to 2030.
He added the country needed help from international firms to revamp its oil sector which is monopolized by the state.
Kuwait currently produces about 2.2 million barrels per day, but has an overall output capacity of around three million barrels per day.
Kuwaiti officials have already shelved plans for the country’s fourth refinery — a multibillion dollar project that had endured repeated delays amid political bickering with parliament. Officials have said the project may be re-tendered, but have not offered any concrete dates.
OPEC, in comments echoed by international energy companies, has said prices need to sustain their current rebound and stay within a minimum range of $70-75, to spur continued investments in boosting capacity and ensuring stable supply.
Sheik Ahmed said he expected oil to sell for between $60 and $80 per barrel through the end of the year, but voiced concerns about what he said was overproduction from Russia. He argued this would ultimately hurt Moscow, which recently overtook Saudi Arabia as the world’s top oil exporter.
The oil producer bloc has repeatedly said that Russia, which is not an OPEC member, was undercutting efforts to lower high global crude inventory levels by not lowering its output levels. In turn, that was squeezing prices at a time when demand remains weak, despite apparent signs the world is slowly emerging from its recent financial funk.
Oil prices rose above $71 a barrel Tuesday, buoyed by a jump in global stock markets and a weaker dollar. Prices have meandered around this level for months as traders struggle to gauge how strongly the U.S. economy will recover.
Sheik Ahmed said the global economy “has started to get out of the bottleneck.”