BP Has Cut Kuwait Staff On Slow-Moving Oil Plans

ABU DHABI, April 17, 2008 (Dow Jones Newswires)

BP PLC (BP), Europe's second biggest oil company, has reduced the number of its employees in Kuwait amid slow-moving negotiations on becoming involved in the country's heavy oil fields, a top company executive said Thursday.

BP continues to hold talks with state-run Kuwait Oil Co., or KOC, about helping the Arab Gulf's third-largest oil producing nation to develop some of its heavy crude reserves, a technically demanding and expensive undertaking.

However, slow progress amid political stalemate in Kuwait has dragged out negotiations. As a result, BP has reduced its staff in the country, the oil company's Middle East and South Asia President Steve Peacock told Zawya Dow Jones in an interview.

"Yes," Peacock said when asked if BP had reduced the number of its employees in the country. "We are interested in working in Kuwait still because we think we can help.

"The issue we're facing is on the one hand IOCs dedicating valuable manpower to Kuwait and simply achieving cost recovery for it," Peacock said, speaking at BP's regional headquarters in Abu Dhabi. "It's not attractive...it's not the business we're in on behalf of our shareholders.

"On the other hand you have to acknowledge that for political purposes Kuwait doesn't want to invite foreign capital investment or use barrels as a form of reward," he said. "So what we're doing is working with KOC to see if there is something in the middle that would provide BP with a level of return that recognizes the skill and experience its people bring."

Political opposition and resistance from nationalists and Islamists in Kuwait's parliament have slowed negotiations between Kuwait and IOCs over developing some of the country's northern fields for years. Rising project cost have contributed to the difficulties in concluding deals.

ExxonMobil last year signed a heads of agreement with KOC to provide enhanced technical services, which doesn't require parliamentary approval, for the development of some heavy oil reserves in the country's north, but other IOCs, including BP and Chevron Corp. (CVX), have yet to follow suit.

"We're still in discussions," Peacock said, without providing a timeframe.

KOC officials last year said Kuwait plans to produce as much as 900,000 barrels a day of heavy crude, mostly from the Lower Fares formation in the north, by 2020.

The project is part of larger plans by the Organization of Petroleum Exporting Countries' fourth-largest producer to boost overall crude output to 4 million barrels a day during the same period to meet rising global demand.

ABU DHABI, April 17, 2008 (Dow Jones Newswires)