State-run Kuwait Oil Company (KOC) signed a $1.23 billion (Dh4.40 billion) oil sites upgrade deal with South Korea's SK Engineering & Construction Co to boost the Opec nation's production capacity, KOC said.

"With a value of nearly 360 million Kuwaiti dinars, this contract is the largest in KOC history," KOC said.

"The aims of the monumental project are: Increasing KOC production capacity; improving the company health, safety and environment practices; enhancing the production associated water handling capabilities; and decreasing gas-flaring," it added.

KOC is in charge of the upstream energy sector in the Arab state, which controls about 10 per cent of global oil reserves and produces up to 2.7 million barrels per day.

The contract is for facility upgrade and relocation of underground process piping at 10 oil gathering centres and a booster station, said KOC.

A gathering centre is a specialised unit at an oilfield which separates crude oil from associated gas and water.

"This contract will set KOC for the next 20 years, providing a completely new infrastructure and adding significantly to KOC production capabilities," KOC Chairman and Managing Director Farouk Al Zanki said in the statement.

"The continued efforts and team cooperation will lead to a safer work environment for KOC employees and give them the confidence to reach the target for increased production capacity," Al Zanki added.

He did not specify what Kuwait's production capacity will be after the project is completed.

Earlier this year, KOC restarted 380,000-bpd capacity gathering centre GC No 15 at a northern oilfield which brought Kuwait's maximum crude production capacity to 2.8 million bpd.

GC 15's $300 million reconstruction was partly carried out by SK Engineering and Construction Co Ltd, as well as maintenance teams at KOC.

KOC said the latest upgrade project will be completed within 750 days and includes relocation of underground oil and gas piping inside gathering centres Nos 1, 2, 9, 10, 11, 16, 17, 19, 20, 22 and booster station 170.

It also entails installation of HP wet separator/LP wet separator, desalters and associated facilities, new water/oil separators and condensate recovery units, KOC added.