Ladies and gentlemen – esteemed colleagues

I am privileged to be with you today on the first day of this program.

I would like to discuss with you how we in Kuwait view the energy transition, how it affects us, and what we are doing to ensure the prosperity of our nation and its people. And just as importantly, I hope that in the spirit of this conference, we can engage in an open discussion that challenges accepted conventional wisdom on these topics.

The energy industry has always been in flux. Peak oil purveyors of doom and gloom in the 1990s rapidly gave way to early 21^st century irrational exuberance – to borrow a phrase – that oil demand and therefore oil prices would remain supra-$100 a barrel. Yet less than a decade ago, we learned the phrase “lower for longer" on the expectation that the US shale oil bounty would cause oil markets to remain oversupplied for an extended period. This led many in our industry to disband their exploration departments starting in 2014. In a typical pre-2014 year, the world discovered about 10 billion barrels a year. Following the 2014 price collapse, exploration budgets evaporated, and the world discovered less than half the normal yearly discoveries. As you all know, it typically takes about seven years for a new oil discovery to be developed and brought onto production. Therefore, the missing discoveries of 2015 would impact production capacity seven years later: and that seven years later is today, 2022.

All of this, of course, is happening against a backdrop of a long-term energy transition.

If I can leave you today with an affirming phrase, it would be that “this is an energy transition, not an energy switch."  Unfortunately, many policymakers believe that they can wish away fossil fuels and magically replace them with renewable energy, complete with a complex distribution network, all within a few years, simply by legislating these outcomes. To be sure, we recognize that to meet the targets in the Paris Agreement, to which Kuwait is a party, we must reduce carbon emissions into the atmosphere.

But to be fair, we must address all emissions. Over the past decade, CO₂ emissions from coal have consistently been 20% greater than those from oil. Coal is a dirtier fuel, yet it enjoys a warmer reception than hydrocarbons. Replacement of coal with gas, however, would greatly reduce carbon emissions into the atmosphere. Here in Britain, just by phasing out coal-powered electricity plants, the UK has dropped its CO₂ emissions to pre-industrial revolution levels. But now, in the wake of dramatically higher gas prices and a low-wind summer, we see a creep up of coal consumption in the UK. Industrialized countries that have been pushing developing countries to sacrifice economic goals for climate concerns are now themselves prioritizing their own economic agendas — if only temporarily — above their stated emissions targets. The lesson, therefore, is that we must be flexible in this transition.

And the reason I stress that this is an energy transition, not a switch, is because we need all types of fuels to power our lives in the future. Energy demand is expected to grow 47% by 2050, and even if oil's share in that pie reduces from about one third down to about one-quarter, absolute oil consumption will continue to rise before levelling off. All of this is without catering for any black swan events.

Already, oil demand has roared back to pre-pandemic levels. And while we expect demand growth to ease with a potential economic slowdown, we still expect an approximately 100-million-barrel-a-day market for the next few years. With normal decline rates in existing fields removing about 2.5 to 3 million barrels a day every year, the world will have to add the production capacity of the State of Kuwait every single year. This will require national oil companies to work with international oil companies and host governments to ensure that technology can develop fast enough to deliver this production in a safe, reliable manner.

So, while the energy transition is expected to continue to include flat oil demand in the medium term, we at KPC will continue to create production capacity to meet the call on our crude while at the same time working to maintain the low carbon intensity of our products.

The energy transition will take time and require sacrifices along the way. California's energy grid today cannot sustain the state's weather and the mandated increase in EV usage. In Texas, where sales of the conventional Ford F150 truck still exceed total EV sales throughout the United States, a power grid not suited for the energy transition failed, causing loss of life and widespread disruption. Estimated costs to upgrade the US power grid to be ready for decarbonization mandates at 2040 are as high as $7 trillion, and remember that this is for the US alone.  With governments cash-strapped after pandemic bail-outs, we don't see how any government can afford these investments on a fast enough scale.

So, in any transition, we foresee that hydrocarbons will remain an essential component of the energy mix.  The question then becomes: who's hydrocarbons?

The oil consumed in 2040 or 2050 cannot be responsible for the same Scope 1 and 2 emissions as today's barrel. The world will place a premium on low-carbon barrels or a penalty on high-carbon ones. By drastically reducing the release of CO₂ into the atmosphere, we can maintain our position as responsible providers of energy decades into the future.

At KPC, we are proud that our barrel is the lowest carbon cost barrel in the world. Experts estimate that we produce about 5kg of CO₂ per barrel, the lowest number in the world. IOCs are well past the teens and into the 20s. Other NOCs outside the GCC are even higher than that.

Our challenge, therefore, is to maintain our position at the left end of the carbon cost curve as well as on our traditional position on the left end of the cash cost curve.

Like those of every major producer that has been in this business for the past eight decades, our fields are starting to age. We have been blessed with an immense hydrocarbon endowment and a geology that is perfectly suited for its development and production. Even Kuwait's topography creates natural flows that never needed a pump – from wellhead to gathering center, down to the export facilities at the coast.

That age, however, is mostly over. Moving from primary recovery – easy oil, if you will – to secondary and ultimately tertiary recovery requires greater use of stimulation to cause oil in older fields flow to the surface. These techniques are energy-intensive, and they will move us to the right on both cost curves. To maintain our position as the most reliable energy partner to the world, we must control cash costs and decarbonize the energy involved in this production.  We are doing this in three ways.

First, we are lowering the environmental impact of our production by developing additional sources of energy to power the growing requirement for electric submersible pumps that are needed in secondary production. To that end, we launched the Sidra-500 power project, which comprises 10MW of photovoltaic panels designed to provide clean energy to the ESPs. This project saves Kuwait approximately 600,000 barrels of oil over the course of 20 years and produces electricity to power 29 ESPs in our Um Gdair field. It is called the Sidra-500 project because it is the environmental equivalent of planting 500,000 trees.

Second, we are lowering the GHG content of our products. Earlier this year, we commissioned the Clean Fuels Project. A major refinery upgrade, this project produces low-sulfur fuels suited to Euro-5 standards, reduces carbon emissions, and meets the needs of our European customers. Indeed, just a couple of weeks ago, the first cargo of ultra-low-sulfur diesel reached our terminal in Napoli aboard a Kuwaiti tanker and the diesel is now being sold at our Q8 service stations in Italy.

Third – and perhaps most promising – we are assessing the results of our pilot project to use CO₂ captured from our operations to inject into our reservoirs to maintain reservoir pressure. This project serves two purposes: first, it removes carbon that would otherwise have been disseminated into the atmosphere and injects it underground; and second, it frees up large quantities of natural gas that would have been used for the same purpose. This natural gas can then be used for petrochemical projects or power generation, thereby reducing Kuwait's need to import expensive LNG. Initial results from the pilot project are that the technology works, and the production efficiency is promising. The main drawback, however, is the expected cost to update and replace our surface facilities to handle the extra CO₂ that will be produced with the oil. We are confident that if we continue to partner with specialized companies, technological advances will quickly reduce these costs to enable a full-scale deployment of this EOR practice.

If we are successful in our efforts, we can continue to boast that the last barrel of oil produced on Earth will come from our region. As the late physicist and Oxford alum Stephen Hawking said: “intelligence is the ability to adapt to change." At KPC, we are excited to adapt alongside the Energy Transition to ensure that we remain a clean, safe, reliable partner to our customers around the world. We are committed to make the changes and investments necessary to maximize the value of the hydrocarbons endowment that God bestowed on us for the benefit of our nation.

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