• Oil Ministry plans to appoint members to the board of Kuwait Petroleum Corporation
  • The move has been opposed by the state-owned group’s CEO
  • Cooperation is now limited between company and Oil Ministry
  • The disagreement could paralyse oil and gas projects

Contractors are concerned that the ongoing row between Nizar Mohammad al-Adsani, the CEO of state-owned Kuwait Petroleum Corporation (KPC), and Oil Minister Ali al-Omair could have wide-ranging negative effects on the country’s oil and gas sector.

At the heart of the dispute between Al-Adsani and Al-Omair are the latter’s plans for the Oil Ministry to nominate members to the board of KPC, increasing his own influence over the country’s energy sector.

This move has been fiercely resisted by Al-Adsani, who believes Al-Omair does not have the legal power to make the appointments.

Amid the ongoing dispute there has been limited cooperation between Al-Adsani and Al-Omair, something that is already impacting decisions on oil and gas projects according to contractors.

“Officials are sitting on their hands and delays are stacking up,” says one source.

Contractors claim the dispute has disrupted the normal process of KPC board meetings – delaying a number of decisions that are of vital importance for the country’s energy sector.

Al-Zour budget

One decision that still requires attention by the board is the expansion of the budget of the Al-Zour New Refinery Project, a multibillion-dollar scheme that is essential to the country’s downstream strategy.

Earlier this month, an additional KD800m ($2.6bn) was approved for the project by the state-owned upstream operator Kuwait National Petroleum Company (KNPC), which is a subsidiary of KPC, but the budget extension still needs to get the green light from the KPC board.

With both Al-Adsani and Al-Omair sitting on the board of KPC, their cooperation is essential to moving the project forward.

Contractors are hoping that the two men will put their differences aside so that the project can progress and many believe that the approval of the expanded budget will be announced over the coming days.

During a session of Kuwait’s National Assembly, Oil Minister Ali al-Omair said he was maintaining communications with Al-Adsani and had met with him on 22 June. He did not give details of the circumstances of the meeting or what was discussed.

This announcement increased optimism among contractors that a decision on Al-Zour’s budget will be announced.

If the approval from the KPC board comes over the coming days, it will be a positive sign for Kuwait’s energy sector, demonstrating that Al-Adsani and Al-Omair are willing to rise above their differences to make decisions that will benefit the country.

If there is no decision, contractor concerns about paralysis in the oil and gas sector will likely escalate.

Industry insiders say that in a worst-case scenario the dispute between the two figures could see all of Kuwait’s oil and gas schemes that are yet to enter the execution phase grind to a standstill.

“Cooperation between these two figures is essential to seeing projects progress,” says one source.

“If there are no clear signals from the top, then other officials working for the ministry and government-owned oil companies will hold back from making decisions.”

Intervention likely

Though possible, complete paralysis is unlikely according to contractors, many of which say that more senior political figures could intervene to makes sure key projects still see progress.

“Both figures are very well connected and they are drawing upon all of their resources,” says the source. “We are expecting higher powers to step in and resolve the situation. It is really inconceivable that this will be allowed to continue.”

If Al-Adsani and Al-Omair fail to reach an agreement without intervention from more senior political figures, disruption from senior figures is likely to be significant.

Both figures are calling on support from allies within Kuwait’s public oil and gas entities, something that is creating divisions in the state-controlled energy companies.

There is no existing protocol for navigating the impasse and it will be difficult for officials to improvise a solution that satisfies all parties.

Additionally, even if intervention does manage to facilitate progress on key projects, such as the Al-Zour New Refinery, dozens of other smaller projects are likely to still see delays due to the disruptive influence of the conflict between Al-Adsani and Al-Omair.

The best solution for Kuwait’s energy sector and the country’s wider economy will be if Al-Adsani and Al-Omair can resolve this dispute without forcing intervention from more senior political figures.

However, Kuwait does not have a good track record when it comes to amicably resolving political disputes.

Before its 2013 elections, the country saw a decade of stalling and setbacks in the Kuwaiti projects market due to clashes between politicians.

The coming weeks may prove to be a crucial test of Kuwait’s ability to find consensus amid challenging political conditions – and show investors that it is not about to return to the political squabbling that caused serious disruption to key capital projects before the election of the current parliament.

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