Politics in Kuwait must not derail Al-Zour

29 August 2008
If the refinery project were again to fail, it would be a massive blow to the local oil sector’s reputation.

Rarely in the region has a project encountered so many stumbling blocks as Kuwait’s mammoth 615,000-barrel-a-day Al-Zour refinery. Location disputes have been followed by a failure to attract a foreign partner, and a costly and lengthy retendering process for the $15bn scheme.

When letters of intent were sent to successful bidders in July, it seemed the last of the challenges had been overcome. But with a group of MPs now threatening to block the project because of the way the tendering was carried out, its progress is again in doubt.

Even in Kuwait’s highly politicised hydrocarbons sector, the extent of political interference has become unreasonable. Officials at state refinery operator Kuwait National Petroleum Company (KNPC) should be able to carry out their work without worrying about the political impact.

If the project were again to fail, it would be a massive blow to the local oil sector’s reputation. Contractors would end up out of pocket but, more importantly, it would put back a scheme that was originally due to be commissioned in 2010 to at least 2014. Given the strategic importance of the refinery, this is an option no one wants.

In hindsight, the decision to cancel the original lump-sum bids submitted in 2006 looks hasty. Not only were the prices fixed, with the risk of rising costs being placed on the contractor rather than the state, but most of the winners of the retendered contracts are the same.

The original bids also went through the Central Tenders Committee. One of the criticisms MPs have made about the retender is that the bids did not.

Despite any perceived shortcomings of the retendered contracts, starting the whole process again would be a huge mistake.

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