Executive Summary:
Kuwait is situated on the northeast corner of the Arabian Peninsula, at the head of the Arabian Gulf. Bordered to the north and west by Iraq, to the south and west by Saudi Arabia and to the east by the Arabian Gulf, Kuwait occupies a strategic position in this vital region. Kuwait is a member of the six-nation Gulf Cooperation Council (GCC). About one-third of an estimated population of 4.5 million are Kuwaiti nationals. The remainder consists of expatriate residents hailing from more than 80 countries. The oil industry and government sector dominate the economy, with crude oil reserves estimated at nearly 101.5 billion barrels, approximately 7% of the world’s reserves. The oil industry accounts for over half of GDP and 94.4% of government revenues. Kuwait is a major oil supplier and a member of the OPEC consortium that has a current production capacity of about 3.15 million barrels per day. With oil the main natural resource, oil refining and downstream petrochemical processing are the dominant industries. Non-petroleum-related manufacturing and agriculture sectors are limited, consisting of a switch-gear manufacturer for power sub-stations, and factories for building materials, furniture, and food packaging.
Upstream Opportunities
The Kuwait Petroleum Corporation (KPC) has announced its intention to increase oil production capacity to 4 million barrels per day (mmb/d) by 2040.addition, KPC has announced intentions to increase natural gas production to four billion cubic feet per day by 2030.Future production increases will depend on actual implementation of several upstream projects including the development of heavy oil capacity of 60 thousand barrels per day.has announced an approximately $115 billion investment plan to be executed between 2015-2020 that is divided roughly equally between the upstream and downstream sectors. Thirty percent of the invested amount will be on local content. Kuwait is developing its gas sector to increase the output of non-associated gas. In 2018, gas projects increased to reach $18.6 bn. Several gas projects are planned for the near future.
Downstream Opportunities:
Currently Kuwait is executing two large refinery projects. The “Clean Fuels Project,” which will upgrade and expand the Mina Abdulla and Mina Al-Ahmadi refinery complexes.National Petroleum Company (KNPC) awarded the Clean Fuel’s engineering, procurement and contracting (EPC) contracts to three international consortiums. U.S. company Fluor was awarded the Mina Abdullah package II contract, worth $3 billion. In addition, KNPC awarded four packages in 2015 to build the country’s fourth refinery, which will produce low-sulfur fuel oil for the country’s power plants. These two mega projects, Clean Fuels and the Fourth Refinery, exceed $30 billion in costs and are expected to be completed by 2020. In 2016, the Kuwait Supreme Petroleum Council approved the Al-Zour Oil Complex Project which is expected to cost $30 billion. In 2016, Kuwaita new KPC subsidiary “Kuwait integrated Petrochemical Industries Company – “KIPIC”). The new company will manage the refinery, petrochemicals and LNG import operations in the Al-Zour complex. The complex will be formed by integrating the Al-Zour Refinery (under construction) with the planned Petrochemicals Complex (project cost: $10 billion) and a gas supply facility (project cost: $4 billion).
Market Entry:
U.S. oil companies, manufacturers, and suppliers of oil field equipment have always experienced strong receptivity in the Kuwaiti market. KPC primarily uses American Petroleum Institute standards in their requests for proposals, which benefits U.S. manufacturers and suppliers. The Kuwait Oil Company (KOC) has an aggressive procurement division eager for niche U.S. technology that can help in increasing production, especially with the heavy oil fields in the north. On the other hand, Kuwait’s oil sector is very competitive. Increasingly, U.S. companies bidding on projects experience strong competition from countries such as India, China and Canada.
Procurement & Tendering:
Companies Law Decree 25/2012, as amended by Law 97/2013, governs the establishment of a business or business relationship in Kuwait. Under the above provisions, a foreign commercial entity may not establish a branch or perform any commercial activities in the country except through a Kuwaiti partner or agent. However, under the Law for the Promotion of Direct Investment in the State of Kuwait (PDISK; Law No. 116 of 2013, which replaced the Direct Foreign Capital Investment Law, Law No. 8 of 2011) an investor can establish a 100% foreign owned Kuwaiti company, a licensed branch orrepresentative office of a foreign entity.
U.S. firms seeking a presence in the Kuwaiti market may do so through commercial agents, distributors, or service agents. Commercial agents promote products or services for a principal, as well as negotiate, conclude, and carry out deals on behalf of the principal (within the scope and authorization provided in the contractual agreement). A distributor promotes, imports, stocks, and distributes the principal’s goods and services.Service agents (sponsors) act as representatives for foreign firms seeking to contract with the government of Kuwait per Article 24 of Commercial Law 68 of 1980, but they generally offer less value added. In 2016, Kuwait passed Law No. 13 of 2016 (The Agency Law).The biggest change with the new law is the removal of the requirement for exclusivity. Foreign firms can now register as many agents as they wish to promote their products.
Tender Law No. 49 of 2016 regulates government tenders. The Central Agency for Public Tenders (CAPT), under the jurisdiction of the Council of Ministers, acts on behalf of most government ministries. It oversees public tenders that are valued at more than 75,000 KD (approximately $248,500). the law, foreign bidders can bid on public tenders without a local agent, however, an agent is needed for the execution phase. The law which went into effect in 2017 requires foreign bidders to purchase at least 30% of the materials from the local market, where available. The law favors local sourcing by mandating a 15 percent price preference for locally produced items. Bidders are selected based on scores against a specified point-based criterion. In addition, bidders can now file a grievance if they have an issue with the tendering process. Besides awarding contracts, CAPT invites companies to pre-qualify, and to attend pre-tender meetings. All CAPT announcements can be found at the website https://capt.gov.kw/en/, and are published weekly in Arabic in the official gazette, al-Kuwait al-Youm. Upon request, Some local translation bureaus offer a partial English translation of the gazette that can be tailored as per the customer’s need.
U.S. Commercial Service Information:
Dina Al-Shawa, Senior Commercial Specialist
U.S. Embassy in Kuwait
P.O. Box 77, Safat, Kuwait 13001.
Tel: +965-2259-1506 Fax: +965-2259-1271
Email: Dina.Al-Shawa@trade.gov
