Kuwaiti oil plan needs foreign firms

24 October 2008
Opposition to foreign involvement means Project Kuwait has been starved of the necessary expertise.

Nothing better encapsulates the problems of Kuwait’s economic development than Project Kuwait.

Drawn up in 1997, the plan aimed to increase the country’s oil production by 500,000 barrels a day (b/d).

Eleven years on, production increases of 1.4 million b/d are now on the revised blueprint, with the government aiming for output of 4 million b/d by 2020. Given Kuwait’s huge oil reserves, a large-scale boost in production capacity ought to be feasible, even if not at quite the level of the new target.

However, since 1997, little progress has been made. At the heart of delays sits Kuwait’s parliament, the National Assembly.

Parliamentary opposition to the involvement of international oil companies in Project Kuwait means the domestic oil sector has been starved of the extra manpower and expertise needed.

The assembly members’ objections to foreign involvement are based on Kuwait’s constitution, which states that “natural resources and all revenues there from are the property of the state”.

There is also a related debate between the government and the assembly about the extent of Kuwait’s proven oil reserves.

The government has resisted parliamentary calls to spell out the precise size of the country’s proven reserves, which in turn is fuelling opposition to the planned production increases.

Critics ask that if no one knows what the reserves are, how can Kuwait’s oil reserves be preserved and “properly exploited”, as the constitution demands under Article 21?

Even if a political compromise can be found to this dispute, the thorny issue of offering the right deal to the international oil firms remains.

With no chance of foreign firms being allowed to take a share in production, the onus is on the Kuwaiti government to devise a new form of contract that will attract oil majors and revive Project Kuwait.

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