Kuwaiti
oil plan stirs nationalist fervor
By
Jamie Etheridge - Correspondent
The
Christian Science Monitor
KUWAIT
CITY
Petroleumworld.com
03 16 06
Like many Arab Gulf nations, Kuwait relies heavily on imported
labor and expertise. From street cleaners to construction workers,
Kuwait regularly imports knowledge, skills, and workers from abroad.
Kuwait's energy sector, however, has always been sacrosanct.
The country's natural heritage has been solely in the hands of
Kuwaiti companies since the government nationalized the oil industry
in the 1970s. Foreign energy companies continued to play a role
but served only as hired hands.
Now with some of the country's most precious oil fields quickly
becoming exhausted, Kuwait is considering throwing open the doors
and handing over power - albeit limited - to foreign oil companies
that have the technical know-how to help stretch what remains
and develop what's yet to be discovered.
Project Kuwait,
a controversial $8.5 billion plan before the country's parliament,
would allow - for the first time in 34 years - international oil
companies (IOCs) power over Kuwait's oil production levels, which
are currently about 2.4 million barrels per day. It would also
give the oil giants much greater influence over global oil supplies
and pricing once they regained a foothold in this country, believed
to have about 10 percent of the world's oil reserves.
But while
global energy executives may be eager to begin drilling under
the Kuwaiti desert, many here don't want to relinquish any national
control of the lucrative oil fields even if it means potentially
losing billions of dollars.
If Kuwait
allows foreign majors back in, it will be laying the groundwork
for long-term dependence on outside help, says Peter Zeihan, senior
analyst with Strategic Forecasting, a geopolitical intelligence
agency in Austin, Texas. Kuwait will be "making itself hostage
to international oil companies," he says.
Mr. Zeihan
argues that the Kuwait Oil Company (KOC), the state-owned agency
responsible for exploration and production, may be getting more
oil but it is also "getting itself into a position where
it will have to continue farming out the management of its oil
fields in order to keep its production where it is. This is a
long-term concern."
The death
of former Emir Sheikh Jaber al-Ahmed al-Sabah on Jan.15 shelved
parliamentary discussions of the plan. But the parliament's Jan.
24 election of the reform-minded, pro-foreign investment Prime
Minister Sheikh Sabah al-Ahmad al-Sabah as emir increased the
likelihood that the sweeping oil reform project will pass over
the objections of Islamist lawmakers who want to keep Kuwaiti
oil production in the hands of Kuwaitis.
Foes of the
plan worry that giving foreigners access to development of its
northern oil fields near the Iraqi border is like giving away
the family patrimony in exchange for quick cash. As Zeihan points
out, the plan to bring in foreigners stokes nationalist sentiments.
"People
hate to see foreigners come in and take the crown jewels, even
if it's just to polish them and put them back," he wryly
notes.
During a public
debate about the project several people hotly rejected the idea.
"The foreigners will come in and we will sit in little offices
and watch them work and learn nothing," said a man who identified
himself as an ex-KOC employee.
Proponents
argue that sovereignty over Kuwait's oil - and the country's ability
to influence international prices through output - will not be
infringed. Oil accounts for about half the country's gross domestic
product and 80 percent of government income. Hisham el-Rifaai,
the executive assistant managing director for Project Kuwait,
contends that IOCs will only help the country produce more.
Opponents
also charge that the project is a political tool to win Western
support for protecting Kuwait's northern border with Iraq. The
four fields the project plans to develop - Abdali, Rawdhatain,
Ratqa, and Sabriyah - lie precariously close to the Kuwait-Iraq
border.
Abdali was at the center of Iraqi accusations back in 1990 that
Kuwait was "horizontal drilling" and sucking out Iraqi
reserves.
Any development
at the border remains a divisive issue. In August, Iraqi protesters
fired shots across the border after Kuwait began construction
on a metal barrier along a trench marking the border. Following
days of violent scuffles, Kuwait backed down and dropped plans
for the barrier's construction.
Kuwait's energy
sector has survived the past 30 odd years on fields explored and
developed in the 1970s and 1980s. With most of these fields aging
and declining, the government is eager to open new fields.
To do this,
however, it needs the advanced and complex technology that only
international oil companies can bring in.
Petroleum
Intelligence Weekly said in January that Kuwait's proven and estimated
oil reserves were closer to 48 billion barrels instead of 99 billion.
The KOC administration has denied the report.
However, another
stunning revelation went undenied: Reserves in Kuwait's Burgan
oil field, the world's second largest, are almost exhausted. Having
produced about 28 billion barrels in the 60 years since it started
production, Burgan is now seeing a crucial decline.
Whatever the
truth, one thing is becoming clear: Foreigners will probably hold
the key to Kuwait's future oil production. As Imad al-Atiqi, a
member of Kuwait's Supreme Petroleum Council and chair of its
influential strategy committee said, "We are importers, not
founders, of technology."
The Christian Science Monitor 03 15 06
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