Kuwait is predicted to earn record government revenue on the strength of high oil prices, but the government could miss out on even bigger oil receipts.
Kuwaiti MPs put record crude revenue at risk
Kuwait is predicted to earn record government revenue on the strength of high oil prices, but the government could miss out on even bigger oil receipts because of a parliamentary push to link oil production to reserves.
Government income in the 2011-2012 fiscal year is expected to surpass the US$100 billion (Dh367.3bn) mark for the first time, with 95 per cent of the revenue coming from crude production, according to a report by the National Bank of Kuwait.
Kuwait's oil receipts rose sharply as prices for crude averaged at $109 a barrel last year, while Brent futures surpassed the $120 a barrel mark last week, pushed up rising supply risks.
Kuwait's production has shot up significantly over the past year and is averaging about 3 million barrels per day (bpd), well above its Opec output quota of 2.2 million bpd.
However, the country's ambitions to capitalise further on its oil revenue are threatened by parliament, which is aiming to limit the pace of oilfield depletion.
The government wants to boost production capacity to 4 million bpd by 2020. But elections earlier in the month saw the majority in parliament shift to the opposition. The new house speaker, Ahmad Al Sa'dun told the Middle East Economic Survey that he wants to push through a law limiting production as a proportion of reserves.
There is little transparency on Kuwait's oil reserves. The official figure of 100 billion barrels has been questioned by the opposition, and reserve figures hinge on the amount of crude that can be extracted, and vary with the investments made in production.
The opposition said it had not been presented with convincing proof of the official figure and an investigation could reveal it to be less, which, in turn, would put in doubt the 4 million bpd production target.
Laws passed by parliament can be vetoed by the emir. His decisions can only be overturned within the same year by a two-thirds majority, which the opposition does not have.
Political figures have told the Middle East Economic Survey that they expect any measures that restrict government income to be unpopular.
"If Kuwait was solely interested in raising its revenues, then it should raise production, because its reserves are still pretty substantial," said Robin Mills, the head of consulting at Manaar, an energy consultancy based in Dubai.
Official figures show that Kuwait posted revenue of $77bn in the first three quarters of the fiscal year, a 41.7 per cent increase from a year earlier.