PROJECT KUWAIT HEADS FOR VOTE IN MID-JANUARY

Bob Tippee
Editor

While mid-December attention has focused on historic parliamentary elections in Iraq, another important vote is shaping up to the south for mid-January.

Kuwait's government has instructed the parliament to open a special session Jan. 16 to discuss Project Kuwait, the long-delayed plan to open upstream investment opportunities to foreign oil companies (OGJ, June 17, 2002, p. 22).

First proposed in 1997 by Kuwait's Supreme Petroleum Council, Project Kuwait would open northern oil fields to foreign participation. The aim is to raise production from the fields to 900,000 b/d from 650,000 b/d within 3 years.

Kuwait hopes to boost its total production capacity to 4 million b/d from 2.5 million b/d now. Skeptics also have suggested it wants to establish a buffer of foreign workers between its population centers and Iraq.

To accommodate constitutional issues about contracts and ownership of mineral resources and keep the government in control of production levels, the project would use an agreement called an incentivized buy-back contract. Groups led by BP PLC, Chevron Corp., and ExxonMobil Corp. are competing for the project.

Project Kuwait has support from key members of the ruling family and Kuwait Petroleum Corp. The Kuwait energy minister recently said the project is essential to achievement of the country's production targets.

But much of the parliament opposes the plan, mainly on grounds of sovereignty and contract structure, concern about corruption, and, more recently, questions about the need for foreign investment in a period of high oil prices.

In October, Project Kuwait survived an effort by new members of the parliamentary financial and economics committee, which had approved a report on the initiative in June, to take the item off its agenda. The government followed that skirmish with its request for full parliamentary consideration of the issue. Opponents are said to be willing to approve Project Kuwait if parliament retains influence over contracts.

A vote, if one occurs, wouldn't have implications as sweeping as those of the Iraqi elections.

But the possible opening of Kuwaiti oil fields to foreign investment is nothing anyone interested in future global oil production can afford to ignore.

(Online Dec. 16, 2005; author's e-mail: bobt@ogjonline.com)

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