Kuwait Energy Outlook 2020: Current Policies and Necessity of Reform
The purpose of the Kuwait Energy Outlook 2020 (KEO-2020) Special Report is to characterize the progress made in Kuwait’s energy sector; to outline the energy and economic outlook until 2035 in light of current economic and energy policies; and identify the necessity of reform necessary to move towards achieving the State’s Vision 2035 ‘New Kuwait’ (Vision 2035). Building on analysis in the Kuwait Energy Outlook for 2019 (KEO-2019), this edition provides context and economic analysis of the importance of Kuwaiti energy sector and the necessity of reform based on the Business-As-Usual (BAU) Case. The analysis relies on assessments from Kuwait Energy Model used for projecting trends in KEO-2019 coupled with results from a computable general equilibrium model of the Kuwaiti economy. The Report first summarizes main developments in energy supply (oil and natural gas), renewables, power generation, and refining activities—all spanning until 2035. The Higher Energy Committee (HEC) is discussed, being the government’s national energy champion, established to advocate for the coordination of the multiple dimensions of the national energy strategy. Projections of energy demand in Kuwait until 2035 show that previous trends still hold, with the transportation sector was remaining as one of the biggest drivers for local energy demand growth in Kuwait (growing at a rate of 3% per year). Under the BAU Case assumptions, export revenues will decline in the Outlook period due to oil price movement and declines in global demand for conventional oil and gas. Simultaneously, subsidies’ cost rises with increasing demand, worsening the fiscal deficit throughout the Outlook period. The share of non-oil sectors in the economy’s gross domestic product (GDP) is likely to increase, but only modestly and not meaningfully in that these sectors’ revenue will not replace the decline of oil export revenue. Contrary to stated objectives, total reported subsidies received by the electricity and water industries increased over time. The growth in the transport sector in the BAU Case is unsustainable, as it will account for approximately 30% of total energy consumed domestically and 22% of total emissions in 2035. Residential electricity consumption is expected to grow at an annual average of 1.2% over the Outlook period. Assuming efficiency levels, margins, and production costs remain constant, simulations estimate that the cost of subsidizing residential electricity consumption would increase by 26% over the Outlook period. The BAU Case shows that it will not be possible to achieve Vision 2035 Plan’s targeted goals of reducing energy consumption and raising the renewables’ share in energy production to 15% of supplied capacity. Achieving these goals will not be possible unless appropriate reform is applied, of which energy subsidy and energy efficiency are the most important and urgent areas to achieve economic, environmental, and energy sustainability. Finally, this Special Report holds that the paucity and opacity of energy statistics precludes a more detailed and comprehensive analysis of Kuwait’s energy future. This Report is published by the Energy and Building Research Center at Kuwait Institute for Scientific Research.
Al-Abdullah, Y. M.; Shehabi, M.; & Sreekanth, K. J. (2020). Kuwait Energy Outlook 2020: Current Policies and Necessity of Reform. Kuwait City: Kuwait Institute for Scientific Research.