Kuwait’s economy is based largely on oil production. Oil and petroleum accounted for almost 50% of the gross domestic product (GDP) 95% of export revenues, and 80% of government income. The country had a record surplus of KD 11.4 billion (US$33 billion) in 2007-2008.
Although historically any surplus has been used to accumulate further foreign assets, the Kuwaiti government is now seeking to increase spending on many major sectors and on foreign investment.
The positive changes to economic regulations, including the amendments to regulations governing foreign investments (FDI), continue to create positive sentiment. A number of international banks are receiving operating licences. the FDI law allows for the possibility of 100% foreign ownership and a 10 year tax exemption. Kuwaiti shareholders are not taxed, while foreign shareholders are currently taxed only 15%. There is no personal income tax in Kuwait.
Non-oil activities, including services and trade, continue to contribute to the growing GDP. Kuwait is used as a gateway to Iraq, and the increase in demand for hotel accommodation, Occupancy has averaged 60%, with some hotels reporting 100%. Property development has increased private sector investment considerably and a number of foreign companies operating in Iraq have based themselves in Kuwait, creating an increased demand for work-related services.
Kuwait's GDP ( purchasing power parity ) :$ 130.1 billion
GDP (official exchang rate) : $ 111.3 billion
GDP (real growth power ) : 4.6 %
GDP – per capita (ppp) : 39,300
Kuwait exports oil and refined products, as well as a number of by-products (including fertilizer). The country’s main export partners are Japan, South Korea, USA, Taiwan and Singapore. Imports include construction materials, clothing, and vehicles and parts, with the main import partners being the USA, Japan, Germany, China, UK, Saudi Arabia, Italy and France. Kuwait’s climate prevents large-scale agriculture practices.
As member of OPEC, Kuwait owns about 8 per cent of the world's proven oil reserves. Its reserves of 101.5 billion barrels are expected to last more than 100 years . Currently, Kuwait produces about 2.6 million bbl/d of crude oil, with output divided about equally between shallow wells and high-pressure wells. These wells, producing up to 10,000 bbl/d each, come from the deep "Marrat" structure which runs north-south through the country and contains an estimated 20 billion barrels of oil in place. Aside from the 1.6 million bbl/d Greater Burgan field, Kuwait's other main producing fields include the northern fields of Raudhatain (380,000 bbl/d of production capacity) and Sabriya (95,000 bbl/d of production capacity); the southwestern fields of Minagish and Umm Qudayr (190,000 bbl/d); Abdali (33,000), and Ratqa (45,000 bbl/d) in the north; and Kuwait's share of the Saudi-Kuwaiti Neutral Zone (270,000 bbl/d). Overall, around two-thirds of Kuwaiti oil production comes from the southeast of the country, with about one-fifth from northern Kuwait and about one-tenth from the west.
Crude Oil Exports
In 2005, Kuwait exported the majority of its oil (over 60 percent, 1.38 million bbl/d) to Asia-Pacific countries such as Japan, India, Singapore, South Korea, Taiwan, and Thailand. Other oil exports were split between Western Europe (112,000 bbl/d) and to the United States (123,000 bbl/d). Kuwait's single export blend ("Kuwait Export") has a specific gravity of 31.4oAPI (a typical medium Mideast crude), and is considered sour with 2.52 percent sulfur content. Around 90 percent of Kuwaiti crude oil is sold on term contracts, with the price of Kuwaiti crude oil tied to Saudi Arabian Medium (for western customers) and a monthly average of Dubai and Oman crudes (for Asian buyers). In June 2006, Kuwait also announced plans to increase crude sales to India by more than 10 percent. Kuwait provided about $4.5 billion worth of crude oil and oil products to India in 2005.
Kuwait has completed major renovations of Mina al-Ahmadi, the country's main port for the export of crude oil, which was virtually destroyed during the Gulf War. Kuwait also is planning a $900 million expansion at the port in order to add storage capacity and increase export capacity in conjunction with plans for expanded oil production in coming years. Besides Mina al-Ahmadi, Kuwait has operational oil export terminals at Mina Abdullah, Shuaiba and at Mina Saud. A new terminal is planned for Bubiyan Island, which will handle increased production from northern and western Kuwait under Project Kuwait
Kuwait project ( development of north Kuwait fields )
Oil development company ( ODC ) , a subsidiary of KPC, was established on 26th September 2005 with KD 300 m capital to oversee the operations of the foreign companies which will develop and rehabilitate north Kuwait oil fields for achieving the targeted crude oil production capacity . The main objective of ODC is to engage a pre-qualified international oil consortium to undertake development of four oil fields north of Kuwait ( Kuwait project ) and to raise the production capacity of these fields to 900 thousand bpd as to serve the best interest of Kuwait and increase income in view of the increasing demand on oil by international markets . For further information visit : http://www.kpc.com.kw/
Kuwait produces a relatively modest volume of dry natural gas (around 343 billion cubic feet -- Bcf -- in 2004), the vast majority of which is "associated gas" (i.e., found and produced in conjunction with oil). Kuwait’s total gas production in 2004 was 396 Tcf. Despite reserves of only 55.5 trillion cubic feet (Tcf), Kuwait hopes to significantly increase its use of natural gas in electricity generation, water desalination, and petrochemicals to free up as much as 100,000 bbl/d of oil for export. Kuwait also hopes to reduce flaring of associated gas by tying together gathering centers.
Aside from imports, Kuwait hopes to increase its domestic natural gas production, both through reduced flaring of associated gas and through new drilling. Exploratory drilling is currently being undertaken at the Raudhatain oilfield, reaching geological formations much deeper than the oil deposits, which are believed to be rich in natural gas. In 2006, a 35-Tcf non-associated find was discovered in northern Kuwait at the free natural gas fields in Sabriya and Umm Niqa areas. It is Kuwait's first natural gas find that was not part of an oil field. Initial studies proved that 60 to 70 percent of the discovered volume can be utilized. According to KOC, the early stages of the actual gas production would start at the end of 2007 after completing the needed surface installations.
Foreign concessionaires dominated Kuwait's oil industry until 1973 when production peaked at 3.3 million bpd at low prices. By 1977 the industry was nationalized and a policy of conservation and reduced output was implemented. In 1981, production touched a low of 1.25 million bpd but rose to 2 million bpd in 1990.
During the 1970s and 1980s Kuwait moved heavily into downstream activities including local refining, transport, overseas refining, and distribution of products -- through the acquisition of foreign assets. Refining and the overseas distribution of products, besides generating higher profits, provided market protection during gluts in crude oil. Kuwait also entered the field of overseas exploration and production.
After a period of reorganization in the late 1970s and the acquisition of foreign corporations in the 1980s, Kuwait's oil industry, supervised by the Ministry of Oil, is controlled today by:
the Kuwait Petroleum Corporation (KPC) as the overall coordinating body.
Kuwait Oil Company (KOC) carries out exploration and crude production.
Kuwait National Petroleum Company (KNPC) manages refineries and domestic marketing.
Kuwait Oil Tanker Company (KOTC) undertakes transportation.
Petrochemicals Industries Company (PIC) produces petrochemicals.
Kuwait Foreign Petroleum Exploration Company (Kufpec) handles exploration of oil overseas.
Kuwait Petroleum International (KPI) manages downstream operations in Europe.
Kuwait Aviation Fuelling Company supplies fuel to aircraft that use Kuwait International Airport.
Sante Fe International Corporation provides expertise in exploration, drilling, pipelines, etc.
Sante Fe's wholly-owned subsidiary, C.F. Braun & Company, provides refinery engineering services.
The destruction of Kuwait's oil industry during the Iraqi occupation was extensive, but damage to exploitable reserves was estimated at only about 2 per cent. Several hundred oil wells and gathering stations (GSs) required replacement. All the three domestic refineries were beyond operation. By mid-1994, however, nominal production capacity of crude from Kuwait and its share of the Neutral Zone was around 2.4 million bpd, and refinery’s capacity was back to pre-invasion levels.
Today, the industry has recovered fully from the onslaught of the Iraqi invasion. The State-owned KPC is estimated to be the seventh largest oil company in the world. It has extensive overseas operations including refineries and large downstream distribution networks in western Europe. Non-Arab states, however, are Kuwait's main customers; the country exports some 78 per cent of its products to them.
KIA ( Kuwait investment authority ) is the official stimulator for kuwait's domestic and abroad investments.
KIA plays a pivotal role in the local economy. It directs and manages the State’s contributions and shares in various major economic entities.
KIA maintains an active involvement with the economic and financial developments in Kuwait. It promotes and supports institutionalization of the market through setting up funds and companies to promote and finance local business, and participation in the launch of local investment which have feasible economic returns.
KIA helps develop the role of local financial companies by giving them the opportunity to manage some of their investments locally and abroad. The private sector’s regeneration will be maintained through the privatization programs which KIA is committed to undertake. Additionally, KIA provides liquidity to the State's Treasury when needed. And, as detailed in the role of the Local Investment Department, KIA has setup several companies in the last few years, primarily to promote investments in Kuwait, it contributed in many domestic investment funds in up to KD 770 million.