After the discovery of oil, British Petroleum and the Gulf Oil Corporation of America formed an operating unit, Kuwait Oil Company (KOC) in 1934, each holding 50 percent of the share capital and since then Kuwait's development has seen dramatic changes.

In 1938, a large oil field was discovered in the Burgan area which boosted oil revenues of Kuwait but World War II deferred development until 1946. Thereafter, progress was spectacular. In 1953 the American Independent Oil Company and the Getty Oil Company, which jointly held concessions for the Neutral Zone, struck oil in commercial quantities; and in 1955 oil was discovered in northern Kuwait. By 1976 Kuwait had achieved 100 percent control of the KOC, with the former owners retaining the right to purchase at a discount. The government also achieved full ownership of the Kuwait National Petroleum Company (KNPC), which it had formed in 1960 with private Kuwaiti investors. The KNPC, designed to serve as an integrated oil company, controlled distribution and petroleum products supplies within the country and began marketing operations abroad.

In 1980 the government founded the Kuwait Petroleum Corporation (KPC) as an umbrella organization overseeing the KOC, KNPC as well as the Kuwait Oil Tanker Company(KOTC), the Petrochemicals Industries Company (PIC), and the Kuwait Foreign Petroleum Exploration Company(KUFPEC). By 1980, Kuwait's oil output was ranked 7th in the world and the World Bank estimated that the state has the highest per capita GNP in the world. The importance of oil to Kuwait can be clearly seen by the fact that oil revenues account for over 90 percent of the country's total income.

The relatively low cost of oil production in Kuwait stems from certain unique advantages. First, there are a number of highly productive wells, the output of which can be varied at short notice, thus eliminating the need for large numbers of storage tanks. Most of the storage tanks are placed on a ridge set back a few miles from the seacoast at a height of some 300 feet; this enables loading operations to be carried out by gravity and not through the use of pumps. There are also extensive refineries and bunkers for tankers.

While retreating from Kuwait at the end of the Gulf War, the Iraqis set fire to more than 700 of the country's 950 wells. By the fall of 1991, the fires, which had consumed 4 to 6 million barrels of oil per day, had been extinguished and limited production had returned, but recovery of the industry remained slow. In mid-1992 oil production stood at nearly 1 million barrels per day.

Massive volumes of natural gas are produced in association with crude oil. Although natural gas has great potential as a source of foreign exchange, its principal uses so far have been in reinjection in oil fields to maintain pressure, in the generation of electricity (as for water distillation), and in the production (as raw material) of petrochemicals and fertilizers.

Kuwait Petroleum Corporation (KPC) has several strategic Natural gas projects in line for the upcoming years.

Kuwait is geographically close to both Qatar and Iran, who owns the second and third largest gas reserves in the world, which gives Kuwait a strategic location from a geographical point of view. Kuwait is planning to establish a fourth oil refinery here which is part and parcel of the same strategic outlook. The refinery would be beneficial in case of a halt or shortages in natural gas imports. It would take between four to five years after receiving the necessary approvals.

Another goal that will hopefully be achieved is tied to a recent study that forces construction companies that win new contracts, whether in the field of services or in construction, to spend approximately 20 per cent of the value of contract inside Kuwait , whether through the purchase of products or local services.