KUWAIT CITY, 9 June 2005 — A Kuwaiti parliamentary committee yesterday approved a huge oil field development project which has been held up for years because of the need for massive foreign investment.
“The committee today unanimously approved the government draft law to seek the help of foreign companies to develop four oilfields” near the border with Iraq at an estimated cost of $8.5 billion, MP Abdul Wahab Al-Harun said.
Project Kuwait has been stalled for more than a decade by resistance from MPs who fear that the Gulf emirate’s oil resources could be surrendered to international oil companies.
It will be the first major foreign investment in Kuwait’s oil resources since the emirate nationalized its oil wealth in early 1970s. Oil income contributes more than 90 percent of total revenues. The committee will now submit its report to Parliament and Energy Minister Ahmed Fahd Al-Sabah said the government will ask the full house to debate the issue before the end of the current term on June 29. “If it is approved by the house, we will immediately start preparations for inviting bidders to the project before the end of this year,” Ahmed told reporters.
The project to develop the OPEC member’s northern oil fields was first put forward in 1992.
Kuwait wants to boost oil production from the fields from 530,000 barrels per day currently to 900,000 bpd during the duration of the project, which Harun said MPs had limited to 20 years.
Harun said the panel introduced a number of changes to the government draft law before approving it.
It first limited the investment to the oil fields of Rawdatin, Abdali, Sabriya and Ritqa and it will not apply to other fields.
The committee ruled out any role for agents or brokers in the project. According to Kuwaiti law, any foreign company must have an agent to operate in the emirate, but this project has been excluded, Harun said.
The investment will be subject to existing Kuwaiti laws and not to foreign arbitration as has been initially proposed. Foreign companies must purchase most raw materials from Kuwait, he said.
Under the draft law, Kuwait will have the right to order a production cut at any time without compensation and companies have to pay income tax on profits of up to 25 percent.
Ahmed had said returns of foreign companies during the 20-year investment will be around $3.2 billion.
The investment aims to use the advanced technology of international oil companies in developing secondary reservoirs as part of a strategic plan to boost the emirate’s output from 2.8 million barrels bpd now to four million in 2020.
Kuwait has set up a new company with a capital of $1.4 billion to manage Project Kuwait and hold deals directly with foreign companies. Independent economic reports however say that the targeted output of 900,000 bpd could not be sustained for more than six years, making the average daily production at 680,000 bpd, or just 150,000 bpd above the current level.
Kuwait is currently pumping at almost full capacity of 2.7 million bpd.
The project will increase total production by slightly over one billion barrels of crude during 20 years, to five billion barrels.
This will earn the state some $21.5 billion of additional revenue.
Kuwait, which holds around 10 percent of global reserves, has already prequalified some 25 operator and non-operator foreign companies for Project Kuwait, including Shell, ExxonMobil, BP Amoco, ENI, Total and Chevron. The companies have formed three consortia which are expected to make fresh bids for the project.