Kuwait's SPC Meets as Major Projects Await Green Light
DUBAI (Zawya Dow Jones), Feb. 8, 2010
Kuwait's Supreme Petroleum Council, or SPC, the country's top oil-decision making body, meets Monday for the first time since December 2008 as oil and gas projects worth billions of dollars continue to await their official green light.
The meeting comes days after Kuwait's Emir issued on Feb. 3 a decree appointing 10 non-government members for a three-year term and seven government members to the SPC after rebuffing demands from lawmakers to exclude non-government members from the council to avoid any conflict of interest.
The newly-formed SPC includes five new non-government members, including former oil minister Eissa Al Mezedi, according to the decree published in the official gazette on Feb. 7.
The SPC, set up in 1974, is headed by the prime minister and includes the oil and finance ministers. The council has been in limbo since the end of 2008 when the government went head-to-head with the country's influential parliament over key projects such as a new refinery and a scrapped $17.5 billion deal with Dow Chemical Co. (DOW).
"We will be doing catch-up because we have not met since December 2008," said SPC member Imad Atiqi, who retained his position in the council.
"There are major projects that need to be tackled by the SPC. They are carried over from previous years such as the new refinery and clean fuels projects," he added.
The political stalemate in Kuwait, an Organization of Petroleum Exporting Countries member and holder of the world's fourth-largest oil reserves according to the BP Statistical Review of World Energy, has slowed economic reform plans and halted numerous energy projects.
"I don't expect major changes in the strategy of the oil sector," said Kamel Al Harami, an independent oil analyst based in Kuwait. "Changes are just a face-lift. The government can still veto projects."
Kuwait's government annulled in March last year contracts worth more than $8 billion awarded to companies to build the country's fourth refinery following criticism from lawmakers about the bidding process. The cancellation was the second setback to Kuwait's energy sector after the government scrapped the Dow deal in December 2008, one month after signing an agreement.
Kuwait has also failed to renew service agreements with international oil companies, which are needed to help it boost production as part of plans to reach an oil output capacity target of 4 million barrels a day by 2020.
The abandoned deals have tarnished the country's reputation among international companies that have grown weary of delays in contract awards and project approvals, and prompted four non-government SPC members to resign in 2009.
"They resigned because they were not content with the government yielding to parliament pressure," said former Kuwaiti oil minister Ali Al Baghli.
Government attempts to boost production of heavy oil from fields in the country's north with the help of international oil companies--a plan dubbed Project Kuwait--have been bogged down for more than a decade by the ongoing standoff with parliament.
Kuwait's constitution bans international oil companies from owning oil reserves in the Gulf state.
Analysts have cast doubt about the ability of Kuwait to meet its 2020 output target of 4 million barrels a day from the current 3.15 million barrels a day due to the hiccups in getting projects off the ground.
Kuwait, which sits on about 10% of the world's oil reserves, is also struggling to boost its gas production, which is needed to fuel the country's power needs and industrial output. The Gulf state suffers from power outages during the peak summer consumption months and started in 2009 importing liquefied natural gas to address the shortage.
"The strategic production plan needs to be revisited," SPC's Al Atiqi said.
Analysts don't expect the SPC appointments to have any impact on Kuwait's OPEC policy, which is in line with the view of most members that the group maintain current oil production as long as prices remain within the $70-80 a barrel range and signs of recovery in global oil demand remain unclear.
Kuwait pumped 2.28 million barrels of oil a day in January, according to the Dow Jones OPEC survey.
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