Kuwait investigates al Zour refinery contracts

Eric Watkins
Senior Correspondent

LOS ANGELES, Aug. 17 -- Kuwaiti Oil Minister Mohammed al-Olaim has refuted legislators' claims of any wrongdoing in the award process for the 615,000 b/d al-Zour refinery project.

Al-Olaim, who noted that no member of parliament had ever asked any questions previously about tender procedures for the plant, said he would make some documents on the tenders available for inspection.

He added that the state audit bureau was already monitoring the venture, so he had no objection to referring the project to the parliamentary complaints committee, a procedure the MPs had demanded earlier this week.

Members of the Popular Action Bloc said that, among other issues, the government should not have awarded project manager Fluor Corp. a separate contract for utility and offsite services without a tender.

The Popular Action Bloc warned that it would question the oil minister or any other minister if the government proceeded to sign contracts worth about $15 billion with foreign firms to build a fourth refinery at Al-Zour.

In a statement, the bloc said the awarding of contracts had been "mired with highly suspicious violations" that risk squandering public funds, adding that decisions taken by concerned authorities involved violations of several laws.

The statement said the government authorities, in approving the vital project, had adopted "illegal procedures," changed its cost, and awarded contracts "that opens the doors wide for illegal profiting and raising its costs."

The statement said the cost of the refinery was initially put at 1.85 billion Kuwaiti dinars, which was later raised to 3.175 billion dinars and finally to 4 billion dinars.

"This opens the door for increasing the cost of the refinery without limit and the final cost could be much higher, thus incurring additional burdens on public funds," the statement said.

Kuwait National Petroleum Co, which operates all refineries in the country, announced the award of the refinery's four contracts to three South Korean companies and a Japanese firm on a cost-plus basis.

The agreements include a package valued at $4 billion to Japan's JGC Corp. and South Korea's GS Engineering & Construction Corp. to build crude distillation units.

A $2 billion contract was awarded to South Korea's SK Energy to build a hydrogen production unit, while Daelim Industrial won a $1.2 billion contract to set up storage tanks.

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