Energy firms gain room to breathe in Kuwait

17 February 2010

The Shell deal shows that Kuwait’s Supreme Petroleum Council is proceeding with real purpose

The news this week that the UK/Dutch Shell Group has signed an enhanced technical services agreement (ETSA) with state oil and gas developer Kuwait Oil Company is a sign that the emirate’s energy sector is at last being given room to breathe.

The contract, the first of its kind in Kuwait, will see Shell work on the development of oil and gas fields. It is the first international oil company to sign up for work in the country since technical service agreements, the predecessors to the ETSAs, were allowed to lapse in 2008 and 2009.

The deal came after Emir Sheikh Sabah al-Ahmed al-Jaber al-Sabah issued a decree for the formation of a new Supreme Petroleum Council on 3 February. The emirate’s highest decision-masking body for the oil and gas sector had to approve the Shell deal, and the fact that it did this so quickly shows it is proceeding with a real sense of purpose.

The council will meet with executives from state refiner Kuwait National Petroleum Corp-oration (KNPC) before the end of March to discuss the fate of a planned $15bn refinery at Al-Zour. Insiders are hopeful the scheme will also be given the go-ahead.

The development of the new refinery has become mired in controversy in recent years as opposition politicians questioned every move that Kuwait Petroleum Corporation, KNPC’s parent company, made.

But the decision by Prime Minister Sheikhs Nasser Mohamed al-Ahmed al-Sabah to accede to parliamentary questioning in December emboldened the government and the recent passing of a five-year economic development plan will also have boosted confidence within government that its plans will be achieved.

It is difficult for observers to share that confidence, given the history of missed deadlines in the state, but things are now at least moving in the right direction.

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