Kuwait petroleum council indecision stalls megaprojects

15 January 2010

Prime minister delays appointment of new council members

Tenders for major new oil and gas projects will not go ahead in Kuwait until the second quarter of 2010 at the earliest, according to senior industry sources in the country, due to delays in appointing members to the Supreme Petroleum Council (SPC), which vets all major energy projects.

The 12-member council is the highest decision-making body in Kuwait’s oil and gas sector. It was disbanded in March when the National Assembly (parliament) was dissolved, following a dispute between parliament and the cabinet which led the government to resign.

The council is selected by the prime minister. However, the current prime minister, Sheikh Nasser Mohamed Al-Ahmed al-Sabah, has not announced a new council since he was reappointed to his post in May.

The SPC’s approval is required for any major contract awards, as well as policy decisions by the Oil Ministry, or major personnel changes at state energy company Kuwait Petroleum Corporation (KPC).

A senior KPC executive says that the delay is in part due to the difficulty of finding people willing to be part of the council, which has attracted increasing controversy in recent years.

“Sometimes they find people who are willing to do it, and sometimes they don’t,” he says. “But it is difficult to find the full council.”

The SPC has been involved in some contentious decisions in recent years. In December 2008 it cancelled a $17.4bn joint venture between state petrochemicals producer Petrochemical Industries Company (PIC) and the US’ Dow Chemical. In March 2009, the council also cancelled construction contracts awarded a year earlier on the planned $15bn Al-Zour refinery after the State Audit Bureau (SAB) called into question the way the deals had been tendered.

State refiner Kuwait National Petroleum Company (KNPC) wants to retender the Al-Zour contracts in 2010 but cannot move on the project until a new council has been formed.

“We are ready to retender the deals however they want us to,” says one senior executive at KNPC. “But the council needs to review the SAB’s decision and to give its recommendations and approval for it before we can do anything.”

The KNPC executive says that he expects a new council to be formed by March, meaning that the refinery and other major projects will not go ahead until the second quarter of the year at the earliest.

Kamel al-Harami, an independent economic analyst and former KPC executive, says that Sheikh Nasser is in no rush to appoint council members, and is reviewing the support he received during his questioning by members of parliament in December.

“He will select people on the basis of whether or not they supported him,” he says. He will take people from the right tribes and political parties, and he will take his time.”

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