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The Kuwait Thread (merged)

For discussions of events and conditions not necessarily related to Peak Oil.

Re: Kuwait drops dollar peg

Unread postby Petrodollar » Thu 24 May 2007, 10:35:40

So the total demand for US dollars to pay for crude is not in fact $1.8 trillion or so, but much less. I would estimate that based on $10 per barrel margins that the net demand is closer to $310 billion net of costs that need to be reconverted back into local currency. It is still a handsome sum to be sure, but your numbers are simply misleading.


No, I stand by my basic statement, and their is plenty of documented evidence to support my analysis, including Dr. Sprio's book. Today, and everyday, the volume of global oil trade is just over $5 billion dollars/petrodollars per day. (I can't find the links for that at the moment, but its not necessary given that oil production and prices are known)

You are trying to confuse the issue by using net margins of oil. That is comparing apples and oranges, and its irrelevant to the discussion about the annual incremental demand for dollars, IMO.

(excerpt from my December 2006 essay)

The propping up of the dollar’s international demand by its monopoly petrocurrency status is illustrated by the huge increase in the price of oil from 2002 to 2005 and the commensurate huge increase in dollar holdings by foreign banks (most often Treasury bills) despite the Federal Reserve’s abnormally low interest rates during most of that period. In 2006, international investment analyst Jephraim P. Gundzik noted this important macroeconomic phenomenon in the Asia Times:

As of mid-2005, foreign investors, including foreign central banks, held an estimated $6.6 trillion worth of US bonds and equities, up from less than $4 trillion in mid-2002. About 60% of this money is parked in long-term US Treasury, agency and corporate bonds. The rapid and sustained increase of international oil prices is the main factor behind the growth in foreign holdings of US securities and the external supply of dollars used to purchase these securities. [1]


Thus it was the huge demand for petrodollars due to high oil prices — and certainly not high yield spreads — that allowed the Federal Reserve to dramatically expand the credit supply by over $2 trillion during recent years. (Note: the Federal Reserve did not begin to increase the abnormally low overnight interest rates until June 2004). Again, I stand by my statement that the annual global demand for petrodollars is well over $1 trillion dollars - gross.

Unfortuantely this correlation between high oil-prices and international demand for the dollar-denominated instruments such as Treasury bills is rarely mentioned in the mainstream US economic commentary, but a March 2006 issue of Business Week confirmed the decades-long connection. Most importantly however, is the crucial fact that petrodollar flows currently plug almost half of the US’s $805 billion current account deficit (this inflow exceeds your "net" estimate of $310 billion):

[Unlike during the 1970s oil boom] Arab states are now major buyers of goods from Japan, China, and the rest of Asia, where they sell the bulk of their oil. So these petrodollars get recycled as Japanese yen or Chinese yuan – which the Japanese and Chinese governments convert into US Treasuries. Indirectly, then, oil money is bankrolling US deficit spending. Paul Donovan, a global economist for UBS Investment Bank in London, estimates that petrodollars, mostly channeled through Asia and Europe, are funding up to 45% of the US current account deficit. [2]


Image

Assuming Donovan's calculations are correct, as of 2006 petrodollar flows were supporting about $1 billion per day of the US current account deficit ($805 billion x .45 = $362 billion per year, or approximately $1 billion per day). If a basket of currencies begins to be used for international oil transactions involving bourses in Iran, Russia, and China, it is highly doubtful that Japan and the other East Asian nations will be able to step into the fray and keep propping up the dollar.

As we all know, some of these countries are in the process of diversifying their currency reserves in order to "maximize performance,” a diplomatic term for moving away from the weak dollar. Kuwait is just the latest member to make monetary decisions to reduce their exposure to USD.

The key enabler of the system is of course Saudi Arabia, and just as in the past, the Saudis are reportedly “holding the line” by thwarting proposals within OPEC regarding euro-based oil trades and propping up the dollar as the monopoly pricing and transaction currency. [3] A major policy change such as a formal transition to euro-based transactions for all OPEC members would likely require a unanimous vote within the cartel — an unlikely event under the present circumstances due to the "special relationship" b/t the Washington and the House of Saud.

However, unfolding developments in Iran, Russia, and China, indicate that a currency basket for international oil trade will begin to unfold in earnest during 2007-2008, thus decreasing the dollar’s liquidity and adversing impacting the ability of the US to service its $2 billion per day debt financing via the "kindness of strangers"...nevermind fight a war that costs $5.8 billion per month (or $11 million dollars per hour).


footnotes:
1. Jephraim P. Gundzik, “Upswings and Downfalls,” Asia Times, January 6, 2006, http://www.atimes.com/atimes/Global_Eco ... 6Dj01.html

2. Stanley Reed, “The New Middle East Oil Bonanza,” Business Week, March 13, 2006, p. 36, online: http://www.businessweek.com/magazine/co ... 975001.htm

3. Faisal Islam, “When Will We Buy Oil in Euros?” Observer, February 23, 2003, http://observer.guardian.co.uk/business ... 67,00.html
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Re: Kuwait drops dollar peg

Unread postby MrBill » Fri 25 May 2007, 02:56:43

petrodollar wrote:
Again, I stand by my statement that the annual global demand for petrodollars is well over $1 trillion dollars - gross.


Yes, $1 trillion GROSS - or the original $1.8 trillion you mentioned - from which NET demand is ONLY international sales denominated in USD LESS those USD SOLD to PAY for local production costs and used to repatriate profits, pay royalties, etc. Because we are trying to talk about the NET demand for USD used to purchase OIL which supposedly props up the value of the USD as a transaction currency.

So I am not mixing apples and oranges, but refering to Asian exports receipts as petro-dollar recycling certainly is. Asian central banks that sterilize the inflow of USD (EUR) denominated export earnings, by printing local CCY and then investing those USD (EUR) abroad is not petro-dollar recycling. It is a form of export financing if you will. Keep the local CCY relatively weak, so that it is externally competitive to increase exports, growth and the jobs dependent on those exports.

That ALL economic growth stems from primary industries - like oil & gas production, agriculture, forestry, fishing, mining, etc. - and that ALL secondary and tertiary growth depends on that primary industry is not an insight, it is Economics 101.

That profits - in this case from oil & gas production - get EITHER re-invested or spent on consumer or capital goods - is also not an insight. If not, then where should this money flow?

Petro-dollar recycling in this broadest sense - so that it is in fact meaningless for the purposes of analysis - mean that the economic wealth being produced from the Athabasca oil sands in N. Alberta is being recycled directly in pick-up sales thereby subsidizing Ford, GM and Chrysler directly. Pick-up trucks as well as tax & royalty receipts for the Canadian and Albertan government. It is just simply silly to look at revenues from oil & gas - or any industry - and say that without them the subsidy or economic stimulus would disappear. That is self-evident.

If Asian exporters sold less to America - who are providing a subsidy to the tune of $1 trillion per year via their trade and budget deficits to the rest of the world - were to decline then Asian manufacturers would be buying fewer machines and capital goods from Germany (and Switzerland). That would lower Germany's export growth, who are the largest exporter for the past two years in a row. So you see Asian exports to American, subsidized by unborn taxpayers, is actually subsidizing German exports and therefore German consumption. That allows Germans to import more from Asia. Asian exports to the EU are growing faster than exports to the USA.

UPDATE: adding info on oil producer reserve growth and link to Asian exports
From 2002 through 2005, about 55% of the increase in the GCC’s total export revenues was saved and only about 45% was spent or invested. Export revenues went up by $243b. The current account surplus increased by $135b. The "savings" ratio would be higher if non-oil exports are stripped out. In 2006, that changed. GCC export revenues increased by about $85b. However, The GCC’s current account surplus increased by only $17b. Roughly 80% of the 2006 increase in exports was spent and only 20% saved.

As a result, the GCC’s overall 2006 current account surplus came in at $176b -- well below the IMF’s initial projections.


In 2006, the oil exporters emerged as an important source of demand for goods and services, not just an important source of demand for financial assets. That no doubt has remained true in 2007. I suspect that strong spending – counting investment in both new oil projects and new buildings as a form of spending – in the big oil exporting economies is a big reason for strong growth in European exports. It also has presumably contributed to strong Chinese export growth.
The great oil spending spree of 2006 (and 2007)

These are called trade links, which are supported by flows of capital stemming from export and trade. Please show me where one stops and another starts? Thanks. And if that trade is primarily denominated in USD then it creates demand for USD as a transaction CCY. If the flows are then re-invested in USD assets it then creates demand - conscious not latent demand - for the USD as an investment CCY. All pretty much self-explanatory even without much effort.
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Kuwait shuts 52,000-bpd Shuaiba heavy oil unit

Unread postby KevO » Wed 30 May 2007, 10:37:33

a 'I wonder what's really going on' type of news item

Kuwait National Petroleum Co. (KNPC) has shut a 50,000 barrels per day (bpd) heavy oil unit at its Shuaiba refinery for 3-4 weeks of unplanned maintenance, a KNPC spokesman said on Wednesday.

“It was unscheduled,” the KNPC spokesman told Reuters. He declined to give more details on what caused the shutdown. The outage would not affect the crude processing capacity of the plant, he said.

Earlier, an industry source said the outage would reduce crude runs by 20 percent to 160,000 bpd and would lead to lower naphtha and middle distillate output.


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Re: Kuwait shuts 52,000-bpd Shuaiba heavy oil unit

Unread postby DantesPeak » Wed 30 May 2007, 17:17:31

It appears that Kuwait plans to close the Shuaiba refinery when a new is completed - hopefully - in the year 2011.

I'm generalizing, but it looks like the Kuwait sees a need to refine the heaviest/impure stuff itself, for internal purposes, implying that there is not much of a worldwide market for that type of oil.

Platts Oilgram News
Copyright 2007 The McGraw-Hill Companies, Inc.
May 9, 2007
Volume 85; Issue 91

Kuwait doubles refinery cost to $12 billion
Engineering estimates soar for new 615,000 b/d al-Zoor plant
Miriam Amie

State-owned Kuwait Petroleum Corporation has approved a doubling of the budget to build a 615,000 b/d greenfield refinery in the emirate from $6.3 billion to about $12 billion after the state refiner received what it considered unusually high bids for the project, senior Kuwaiti oil officials said May 8.

"We have to be realistic," Oil Minister Sheikh Ali al-Jarrah al-Sabah told reporters on the sidelines of an oil conference in Kuwait. "This is a market so we have to cope with what's going on in the market," he said, adding the KPC board approved the increase May 7. "Yes, double," he said when asked if the proposed budget for the plant, to be located in the al-Zoor coastal area some 85 km south of the capital Kuwait City, was now two times the original $6.3 billion.

"The new target date for completion is the end of 2011," he said. Originally KNPC hoped the refinery, the nation's fourth, would have been completed by 2010.

Kuwait is building the fourth refinery to provide low-sulfur fuel to run its demanding electrical power stations, desalination plants and a growing petrochemical industry. The plant also would produce 375,000 b/d of high-quality low-sulfur oil products for export such as naphtha, benzene, kerosene and jet fuel.

Capacity at Kuwait's existing three plants is 930,000 b/d, with Mina al-Ahmadi processing 460,000 b/d, Mina Abdullah 270,000 b/d and Shuaiba 200,000 b/d. The plan was to eventually close the aging Shuaiba after the new refinery comes on line.



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Re: Kuwait shuts 52,000-bpd Shuaiba heavy oil unit

Unread postby shortonoil » Wed 30 May 2007, 21:54:07

DantesPeak said:

I'm generalizing, but it looks like Kuwait sees a need to refine the heaviest/impure stuff itself, for internal purposes, implying that there is not much of a worldwide market for that type of oil.


It looks like they are aware of a problem; if they start burning their light sweet crude them selves, they are soon going to be out of the oil business. I think, it is instructive to note, that the most effort being put forth to build refineries to process heavy dirty crude is being done by the sources that supposedly have the most light sweet. PO is destined to hit everywhere - there will be no exclusions.
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Re: Kuwait drops dollar peg

Unread postby roccman » Thu 31 May 2007, 22:46:05

http://www.ft.com/cms/s/f2f3a8a8-0f12-1 ... 10621.html

"Now Kuwait has chosen to go its own way, leaving Saudi Arabia, Qatar, the United Arab Emirates and Bahrain to ponder their tolerance for open-ended dollar-buying. Little Kuwait just might be the herald of big change, both in the dollar's fortunes and the world's monetary organisation. To a degree, the world turns on open-ended dollar buying and the muscular feats of money-printing it calls forth."
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Kuwaiti MPs want size of oil reserves disclosed

Unread postby TheDude » Mon 09 Jul 2007, 15:43:39

Really!

From Gulf News

Published: July 09, 2007, 14:40

Kuwait: Several Kuwaiti deputies have threatened not to approve this year's national budget if the government fails to disclose the size of its oil reserves, a newspaper reported on Monday.

Parliament is expected to approve the budget of the major OPEC producer by the end of its final session on Wednesday before a summer break.

"We cannot make the correct future plans without knowing the size of the reserves... so this should be made clear to parliamentarians before the session to pass the state budget,"Alam Alyawm newspaper quoted deputy Ahmad Lari as saying.

MP Daifallah Buramya also told the paper he would not support approval of the state's budget if the size of the country's oil reserves is not disclosed.


Took 'em a year and a half to bring this up again? Do they have year long sessions in the Kuwaiti Parliament?

Former Oil Minister Sheikh Ali Al Jarrah Al Sabah, who resigned last month, sparked confusion when he told the daily Al Jarida in May he could not deny these estimates while at the same time questioning how reserves were defined. Depending on definition, a wide range of estimates could be correct, he said.


Like the man said, could you be a little more vague?
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Re: Kuwaiti MPs want size of oil reserves disclosed

Unread postby FireJack » Mon 09 Jul 2007, 17:15:04

I think it would be great if every oil producing country that currently lies about its reserves was forced to do a realistic study and release the results. Its a pipe dream I guess but it would grab a lot of peoples attention.
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Re: Kuwaiti MPs want size of oil reserves disclosed

Unread postby PWALPOCO » Mon 09 Jul 2007, 17:44:01

To be honest , it is true that depending on how you define the reserves a host of values could be "true". Certainly data transparency would be welcome though if only to figure how big a mess we are likely to be in.

I dont think it would be unreasonable to assume though that if Kuwaits reserves are over stated , and that the timeframe for that assesment goes back to the 1980s then its likely to be tied in to the general OPEC reserve increases of that time all that those entail !

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Re: Kuwaiti MPs want size of oil reserves disclosed

Unread postby Gazzatrone » Mon 09 Jul 2007, 18:57:27

FireJack wrote:I think it would be great if every oil producing country that currently lies about its reserves was forced to do a realistic study and release the results. Its a pipe dream I guess but it would grab a lot of peoples attention.


This is how it would be.

The levels in reserves are exposed as grossly inflated.

Oil Producing Country Response: You have to bear in mind that these are the proven oil reserves, which means these are the reserves we know about and not reflective of the reserves that are out there just waiting to be discovered.

General Populous: Sigh's with relief and carries on the way they have been.

Cynic's Retorts: So why aren't you looking for these reserves just waiting to be discovered?

General Populous: Starts to get nervous.

Oil Producing Country Response: Because we are investing in technologies that allow us to extract more from the fields we currently have operational.

General Populous: Sigh's with relief and carries on the way they have been.

Cynic's Retort: but if you are spending all that money on existing fields, What happens when those field become redundant and you don't have the energy surplus to discover new fields?

General Populous: Starts to get nervous again.

Oil Producing Country Response: Rest assured by that time, new technologies will allow us to exploit those new fields.

General Populous: Sigh's with relief and carries on the way they have been.

And so it goes.....
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Re: Kuwaiti MPs want size of oil reserves disclosed

Unread postby DantesPeak » Wed 11 Jul 2007, 12:55:29

It has taken over a year, but Kuwait seems finally to be starting to come to grips with the true level of its oil reserves, following a Petroleum Intelligence Weekly article in early 2006 that indicated that reserves were half the official level of just over 100 billion barrels. The PIW story was based on an internal national oil company report. Now an opposition member of parliament has come forward with another internal document indicating that reserves may be only 24 billion. The government may be forced to provide a full accounting of reserves on a field-by-field basis in order to restore confidence. Some of the oil reserves fiasco is due to the problems of the massive Burgan field, which was not only torched by retreating Iraqi troops in the Gulf War but also seems to have been poorly managed. Fortunately for Kuwait, the damage done to Burgan may be able to be at least partly compensated for by fields in the north. Tom Wallin, New York


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Re: Kuwaiti MPs want size of oil reserves disclosed

Unread postby TheDude » Wed 11 Jul 2007, 13:55:17

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Re: Kuwaiti MPs want size of oil reserves disclosed

Unread postby PWALPOCO » Wed 11 Jul 2007, 17:39:40

'We confirm that Kuwait's oil reserves are 100 bln barrels,' acting oil minister Mohammad al-Olaim told reporters after briefing parliament in a closed-door session about the levels of reserves in the Gulf emirate.

The session was called by a number of opposition MPs who demanded the government provide the exact figures of reserves amid fears that they were much less than the officially announced figures.

In January 2006, the industry newsletter Petroleum Intelligence Weekly (PIW) reported that Kuwait's oil reserves stood at 48 bln barrels, based on internal Kuwaiti records seen by the newsletter.


News Link HERE

Well that didnt take long to sort out now did it ! Now move along, theres nothing to see here except a little whitewashing.

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Re: Kuwaiti MPs want size of oil reserves disclosed

Unread postby Cyrus » Wed 11 Jul 2007, 17:49:57

If the reserves are really as big as they state they are, why the hush-hush?

The scent of peak oil gets closer and closer day by day. Some of you just don't recognize the smell. I do.
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Kuwait to Develop Heavy Oil Reserves by 2020

Unread postby DantesPeak » Mon 22 Oct 2007, 20:37:32

Overcoming objections of Islamists, Kuwait is now seeking international oil company help to develop its remaining oil fields. Kuwait has hired Exxon to help develop its northern heavy oil fields, located after a costly search effort. The plan faces challenges such as a lack of skilled workers and Gulf War land mines, not to mention special refineries that will be needed to process heavy oil.

Kuwait signs deal with ExxonMobil to develop heavy oil: official

Kuwait City (Platts)--22Oct2007

Kuwait Oil Co has signed a heads of agreement with ExxonMobil to develop Kuwait's heavy oil reserves with a production target of 900,000 b/d by 2020, Khaled al-Sumaiti, deputy director for KOC's northern operations said Monday.

He told an energy conference in Kuwait City that the two sides hoped to conclude a final agreement in July to develop the heavy oil reserves located mainly in northern Kuwait. Initial production is targeted at 50,000 b/d by 2012, rising to 250,000 b/d by 2015 and 900,000 b/d by 2020, he said.

"We have an agreement with ExxonMobil to develop that heavy oil. We have signed a heads of agreement and we hope to sign the final agreement in July," Sumaiti said, adding that the OPEC producer was seeking other foreign partners to help develop the heavy oil deposits.

"What we are looking for in the upstream is an enhanced services
agreement and in the downstream, a joint venture agreement," he said.


Platts


Kuwait's KOC, Exxon sign heavy oil production deal
Mon Oct 22, 2007 9:23am EDT

By Ulf Laessing

KUWAIT, Oct 22 (Reuters) - Kuwait said on Monday it had reached a preliminary deal with Exxon Mobil Corp (XOM.N: Quote, Profile, Research) to produce heavy oil in the north of the Gulf Arab state and aimed to boost production to 900,000 barrels per day by 2020.

State owned Kuwait Oil Company (KOC) said it wanted to reach a final deal with the U.S. company to explore the Lower Fars oil field near the Iraqi border by July 2008 but negotiations were still ongoing.

Exxon Mobil said the deal would be to produce 700,000 barrels per day (bpd) from the field, while KOC, which is in charge of oil exploration in the world's seventh-largest oil producer, added that it also wanted to explore other fields to reach its long-term target.

Kuwait has been planning a multi-billion project to explore its northern oil fields for more than a decade but it has never made beyond committee level at parliament as some Islamist deputies oppose the involvement of foreign firms.

Two years ago, Kuwait estimated the cost of the project at $8.5 billion.


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Re: Kuwait to Develop Heavy Oil Reserves by 2020

Unread postby ohanian » Mon 22 Oct 2007, 20:53:17

DantesPeak wrote:Kuwait Oil Co has signed a heads of agreement with ExxonMobil to develop Kuwait's heavy oil reserves with a production target of 900,000 b/d by 2020, Khaled al-Sumaiti, deputy director for KOC's northern operations said Monday.

He told an energy conference in Kuwait City that the two sides hoped to conclude a final agreement in July to develop the heavy oil reserves located mainly in northern Kuwait.


Marty McFly: Whoa, this is heavy.

Dr. Emmett Brown: There's that word again; "heavy". Why are things so heavy in the future? Is there a problem with the world's oil fields?
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Re: Kuwait to Develop Heavy Oil Reserves by 2020

Unread postby PeakingAroundtheCorner » Mon 22 Oct 2007, 21:26:12

Come one! Come all! Welcome to the Post-Peak World!

Step right this way ------->>>>
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Re: Kuwait to Develop Heavy Oil Reserves by 2020

Unread postby DantesPeak » Mon 22 Oct 2007, 21:34:00

:) Yep, there's that word heavy again, actually a whole conference in Kuwait to talk about 'heavy'.

Kuwait hosts international energy conference

Kuwait News Agency (KUNA) - 21/10/2007

(MENAFN - Kuwait News Agency (KUNA)) Kuwait will host on Monday the World Energy and Chemicals Exhibition and Conference held under the auspices of His Highness the Crown Prince Sheikh Nawaf Al-Ahmad Al-Jaber Al-Sabah with participation of 70 local and international companies.

The four-day conference and exhibition will be inaugurated by the Minister of Electricity and Water and acting Minister of Energy Mohammed Al-Olaim which is organized by Kuwait Institute for Scientific Research (KISR) and the Kuwait Foundation for the Advancement of Science titled "Heavy Oil - Meeting the World Energy Demand."


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Re: Kuwait to Develop Heavy Oil Reserves by 2020

Unread postby DantesPeak » Sun 28 Oct 2007, 01:17:26

Image






Why Kuwait wants to shift to heavy oil?
Published Date: October 28, 2007
By Rania El Gamal, Staff writer

KUWAIT: Last week, Kuwait announced its plans to shift into heavy oil production during an international oil conference to meet its 2020 target of producing 4 million barrels per day (bpd).

Kuwait has traditionally produced and exported mainly medium to light crude since the 1950s. Now KOC is pushing for more involvement of international oil companies in developing its heavy oil assets. But why is Kuwait shifting to heavy oil production?

Developing and marketing of heavy oil is highly challenging both technically and economically. For Kuwait, shortage of skilled manpower and lack of the know-how to clear mines in the northern fields are some of the challenges facing KOC.

The focus of the four-day energy conference, organized by state-owned Kuwait Petroleum Corporation (KPC), was heavy oil crude; opportunities, challenges and recovery techniques. Though currently Kuwait doesn't produce any heavy oil for export according to industry officials, Kuwait Oil Company (KOC) announced during the conference a preliminary agreement with Exxon Mobil to develop its heavy oil assets.


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Re: Kuwait to Develop Heavy Oil Reserves by 2020

Unread postby Tanada » Sun 28 Oct 2007, 09:12:43

DantesPeak wrote:
Why Kuwait wants to shift to heavy oil?
Published Date: October 28, 2007
By Rania El Gamal, Staff writer

Kuwait has traditionally produced and exported mainly medium to light crude since the 1950s. Now KOC is pushing for more involvement of international oil companies in developing its heavy oil assets. But why is Kuwait shifting to heavy oil production?




They ask the question, but they don't supply and answer. Most of us beleive it is PO, but the reporter never gives an answer.
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