KUWAIT CITY, 1 September 2004 — Kuwait has appointed a top oil executive to speed up a proposed $7-billion project that has been stalled for a decade amid concerns by lawmakers that the constitution could be breached.
Ahmad Al-Arbeed, chairman of Kuwait Oil Co. (KOC) for the past three years, was moved to lead Project Kuwait, a mega-investment to develop four oil fields near the border with Iraq with the help of foreign oil majors.
The investment is aimed at increasing production there from the current 450,000 barrels per day to about 900,000 bpd. “The appointment of Arbeed is a clear sign that the government is determined to accelerate the implementation of the project, which has been stalled for mainly political reasons,” Kuwaiti economist Hajjaj Boukhdour told AFP.
Arbeed has been handling the project for the past three years as chairman of KOC, which is responsible for exploration and production. His appointment, part of a major shake-up at the top of Kuwait Petroleum Corp. (KPC), also comes after the government finalizes its latest proposals on Project Kuwait. They will be sent to Parliament, which is on summer recess until October.
MP Nasser Al-Sane praised Arbeed’s appointment but warned that Parliament could still reject the latest government proposals for fear they violate the constitution.
The Kuwaiti constitution prohibits any investment in the country’s natural resources without a law. “It appears the project has returned to square one. Now the government wants to implement the project on the basis of technical service contracts which could be done without a law,” Sane told AFP.
“This means they want to do the project outside the supervision of Parliament. I don’t think that any MP would agree to this ... This is a very serious development and such contracts are in breach of the constitution,” he warned.
Kuwaiti lawmakers have in the past voiced strong opposition to the project and expressed concern that it would involve surrendering Kuwait’s wealth into foreign hands, something officials have repeatedly denied.
A number of MPs had insisted that Kuwait does not even need the project because it has a surplus in oil output capacity, but the latest developments in the oil market have indicated the emirate urgently needs to boost capacity.
Kuwait is currently producing flat out at approximately 2.5 million bpd, and its OPEC quota is 2.087 million barrels. It has already prequalified some 25 operator and non-operator foreign companies for the project including Shell, ExxonMobil, BP Amoco, ENI, TotalFinaElf and Chevron, among others.
The companies have formed three consortia which have submitted bids for the project. A selection is not expected before the government finalizes the deal with parliament.
Energy Minister Sheikh Ahmad Fahd Al-Sabah said in June the emirate is planning to increase its daily production capacity to 10 million bpd in 20 years with the help of foreign oil majors.
A new oil strategy for Kuwait stipulates raising output capacity to four million bpd by 2010 and to five million bpd by 2015.
Boukhdour believes Parliament will eventually approve the investment, although the government was not required to send the new formula to MPs because the investment is purely technical service contracts.
Kuwaiti oil officials have said the return on investment that foreign companies would receive from the projects will not exceed five percent, a very low rate by international standards.
