Kuwait'scompliance with OPEC+ oil production cuts will cap economic growth this yearbut the restart of production from a region shared with Saudi Arabia will propup future GDP, S&P Global Ratings said in a report.
Kuwait,OPEC's fourth largest oil producer, will post GDP of 0.5% growth in 2020, thesame as 2019, as it is projected to produce an average of 2.65 million b/d thisyear compared with 2.8 million b/d average last year, the rating agency said ina report dated January 17.
"TheDecember 2019 OPEC+ decision to further cut oil production constrainsshort-term growth while the recent escalation of U.S.-Iran tensions posesrisks," S&P Global Ratings said. "The oil sector directlycomprises close to 50% of the country's GDP, although if other relatedactivities are taken into account, that proportion is even higher."
InDecember, OPEC and 10 non-OPEC partners agreed to deepen their production cutagreement to 1.7 million b/d from January through March 2020.
Kuwait'snew quota under the deal is 2.657 million b/d.
Kuwaitpumped 2.71 million b/d in December, in line with its old OPEC+ quota,according to the latest S&P Global Platts OPEC survey.
Kuwait'seconomic growth rates after 2020 are expected to pick up and reach an averageof 2.5% between 2021-2023 thanks to a resumption of production from the neutralzone, where output is shared equally with Saudi Arabia.
Kuwaitand Saudi Arabia agreed in December to restart production from the offshore andonshore fields in the neutral zone that have been shut for more than fouryears.
"Oilproduction from the PNZ (the partitioned neutral zone) could amount to 0.5 mbpdonce operational, although actual output will remain lower in the short term,partly because Kuwait will continue to comply with the new OPEC+ agreedcuts," S&P Global Ratings said.
Theoffshore Khafji field, owned by Saudi Arabia's Aramco Gulf Operations Co. andKuwait Gulf Oil Co., was shut in October 2014 by Aramco, which cited newgovernment emissions standards for gas flaring.
Saudienergy minister Prince Abdulaziz bin Salman said in December production fromKhafji is expected to reach 325,000 b/d by the end of 2020.
Theonshore Wafra field is operated by KGOC and Saudi Arabian Chevron. It wasshuttered in May 2015, with Chevron saying it encountered difficulties insecuring work and equipment permits. Chevron said in December full productionat Wafra will reach pre-shutdown capacity within 12 months.
