Kuwait Petroleum Corp. will need the money to maintain the petrostate’s crude-production levels, said the person, who asked not to be named because the information is private. Borrowing plan underscores how badly Gulf countries were impacted by the drop in crude prices last year as the coronavirus pandemic spread and energy demand plunged. The company remits almost everything it generates from crude sales to the OPEC member’s government. It then gets reimbursed in installments to fund capital expenditure, mainly for upstream operations and investments in oil fields. The firm may face a deficit of KD6bn ($19.9bn) over five years, though it hopes to minimize the gap by becoming more efficient.
Kuwait’s financial position – like that of almost all major oil producers – took a hit last year when the virus grounded planes and shut down businesses across the world. The government faced a cashflow crisis and it instructed KPC to transfer more than KD7.5bn in dividends to the Treasury. KPC has since reached a preliminary agreement to repay the sum over 15 years. That helps but won’t solve the company’s problem. Oil accounts for 90 per cent of Kuwait’s revenue. The nation pumps around 2.4 million barrels of crude a day, making it the fourth-biggest member of the Organization of Petroleum Exporting Countries. Kuwait is trying to cut spending to contain its economic slump. KPC has slashed capital-expenditure projections for the next five years by more than 30 per cent. The company has hired a consultant to help merge eight subsidiaries into four to streamline operations.