Kuwait is increasingly focusing on tapping more challenging oil and gas reserves in a bid to tackle domestic gas shortages and falling crude oil production capacity. But this has come at a cost. The challenge of developing these complex reserves has pushed up costs for state-owned Kuwait Petroleum Corporation (KPC), potentially putting its upstream sector at a disadvantage against nearby states. With these reserves central to future expansion plans, production costs look set to rise further.

KPC is Kuwait’s state energy-sector umbrella company and its two upstream arms are Kuwait Oil Company (KOC) and the smaller Kuwait Gulf Oil Company (KGOC) which oversees activity in the Neutral Zone. Kuwaiti daily Al-Anbaa recently revealed that KPC’s average per-barrel production costs have soared by 90% over the past decade from KD1.35 ($4.87) in 2012 to KD3.31 ($8.52) last year, a 75% increase in dollar terms (see chart 1). (CONTINUED - 2090 WORDS)