Kuwait Energy II Kuwait Energy Company K.S.C.C (KEC, or the Company) is carrying out a work program, that mainly consists of: (i) drilling four development wells to increase production in KECs two main gas producing assets in Ukraine; (ii) drilling eight development wells in KECs three producing assets in Egypt; and (iii) drilling about six exploration wells and shooting seismic over various oil and gas exploration targets in Egypt, Ukraine and Yemen.  

The Project will allow the Company to continue on its growth trajectory by increasing its production in Ukraine, Egypt and Yemen from approximately 9,500 barrels of oil equivalent per day (boepd) to over 15,000 boepd by end 2010, with most of the increase coming from additional gas production in Ukraine. It will also enable the Company to test 82 million barrels of oil equivalent (boe) of mainly gas exploration targets and define additional targets through new seismic surveys. The project will lead to further exploration, appraisal and development of domestic natural resources in Egypt, Yemen and Ukraine, helping to meet domestic demand for oil and gas and curbing production declines particularly in Yemen and Egypt.   Revenues to governments, particularly in the case of Yemen and Egypt, provide the countries resources to promote macro-economic stability and support development priorities.

The Project's expected benefits will come in the form of:

1. Increased domestic gas supply in Ukraine: The Project will help to increase domestic gas supply and contribute to relieve reliance on imported gas. In addition, success of KEC in Ukraine may encourage other private companies to invest in Ukraine's gas sector. 

2. Contribution to Government Revenues: the Project benefits to the governments of Egypt, Yemen and Ukraine include revenues in the form of production share, royalties and corporate taxes.  In 2009, the Government of Egypt's fiscal take from KEC's operations in Egypt was US$68 million, the Government of Yemen's take was US$11 million and the Government of Ukraine's take was about US$2 million. 

3. Employment, development of local skills, technology transfer: The Project will help to sustain employment and, in particular, develop local skills. KEC's direct local employment in Egypt, Yemen and Ukraine is expected to continue to increase as KEC further expands its operation.  Training of local people and technology transfer are especially important in Ukraine due to the lack of private investment in the gas sector in the country and the restriction on expatriates working in the country.  
  
4. Supporting the development of local independent E&P sector in Middle East and North Africa: The E&P sector in MENA has traditionally been dominated by large state-owned oil companies or western oil and gas companies. KEC is one of the first significant attempts by the local private sector to participate in this industry. KEC's ability to grow into a company on par with other mid-size international E&P companies will have a demonstration effect to encourage other such private sector initiatives.

IFC plans to monitor the following indicators during supervision: (i) annual production of gas in Ukraine (mcf); (ii) payments to governments (US$); (iii) number of direct employees in portfolio countries; (iv) community development outlays (US$); (v) purchase of domestic goods and services (US$).