Projects held up in Kuwait

15 March 2011

Giving the green light to oil-sector projects would send a positive signal to the Kuwaiti people

Despite positive noises at the end of last year, Kuwait has still to make a final investment decision on upgrading and expanding its refining capacity. Five contracts signed in 2008 to build a new refinery were cancelled the following year amid pressure from parliamentarians, concerned over how the deals were awarded. The project has not moved forward since then.

The delay to the new refinery has had a knock-on effect on a second scheme to improve the refining quality at existing facilities. With exports of crude and refined products accounting for some 90 per cent of Kuwait’s gross domestic product, continued investment in the sector is crucial for the economy.

The nature of Kuwait’s heavy crude restricts its potential market and there is a growing trend in the West to turn away from using fuel oil, which is increasingly seen as highly polluting and inefficient. Investment is also needed to improve safety at the existing installations. Kuwait has the worst safety record in the Gulf, outside Iraq and Iran. They, at least, have decades of sanctions and security issues to blame. A fire at the Mina Abdullah refinery injured two workers last year.

Slow decision-making and parliamentary interfering has held up billions of dollars worth of projects in Kuwait over the past few years. Much-needed infrastructure projects in the transport and utility sectors have languished on the drawing board.

But it is the investment in the oil sector that will provide the future revenue to pay for such projects, as well as funding the public sector jobs that keep nearly 80 per cent of the population in employment. As a wave of civil unrest sweeps the region, giving approval for these schemes to go ahead now would send a strong signal to Kuwaitis that the government has its people’s best interests at heart.

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