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Opposition win could derail Kuwait oil strategy: analysts
By Omar Hasan
AFP
KUWAIT CITY
Petroleumworld.com 06 27 06
Rows between the government and opposition are unlikely to affect short-term oil policy, but an opposition win in Kuwait's election on Thursday could derail long-term production strategy, analysts say.
Opposition politicians running for parliament object to plans to increase the oil-rich Gulf state's output because of doubts about the size of its crude reserves. They also object to the involvement of foreign firms in the country's upstream industry.
Leading liberal opposition candidate and former MP Abdullah al-Nibari vowed that the opposition will work to introduce key changes to the government's oil strategy, especially on boosting production.
Kuwait currently pumps around 2.5 million barrels of oil per day (bpd), which is close to its full production capacity. But a 15-year strategy launched last year provides for boosting output to more than four million bpd.
Buoyed by a windfall from high oil prices, Kuwait plans to spend at least 66 billion dollars on raising production, modernising its oil infrastructure and building a state-of-the-art 630,000-bpd refinery.
It also plans to upgrade two of three existing refineries and build modern crude and products export facilities and giant petrochemicals plants.
But the emirate faces the daunting task of dispelling doubts about the credibility of its published reserve figures.
"Regardless of the outcome of the election, the government must answer this urgent question about the true reserves figure. Without a clear reply, pushing projects will be difficult," former oil executive Kamel al-Harami told AFP.
The reputable Petroleum Intelligence Weekly (PIW) reported in January that Kuwait's crude reserves were only half the announced official figure of 99 billion barrels, and that proven reserves were as low as 24.2 billion barrels.
Outgoing opposition MP Ahmad al-Saadun sent an urgent question in March to Energy Minister Sheikh Ahmad Fahd al-Sabah asking him about the report and about actual Kuwaiti reserves.
Saadun said that so far he has not received an answer. He vowed at an election rally to pursue the issue if re-elected.
"I think this issue may cause some problems for government plans to raise output... and if the PIW figures are correct it will be a great shock," Harami said.
Oil expert Hajjaj Bukhdour said Kuwait's long-term oil strategy is essentially based on a 20-dollar per barrel price, but prices have now more than trebled and are expected to remain strong for several years.
"If the opposition wins, I think there will be a major change to the strategy. MPs will be less enthusiastic to support a production increase, especially in the (controversial) northern oilfields development project," Bukhdour told AFP.
"This is basically because raising production was meant to boost income when the price of oil was low. Now we have a huge surplus and prices are very high," he said.
Over the past seven fiscal years, Kuwait boasted a budget surplus of 50 billion dollars and an equal amount from returns on its mammoth foreign assets, now estimated at more than 150 billion dollars.
The opposition is expected to argue that since Kuwait has a huge surplus "it would be better to keep the crude underground rather than sell it now when we don't need the money", Bukhdour said.
Saadun and four members of his Popular Action Bloc in parliament had already tabled a draft law that would limit annual production to just one percent of actual reserves.
Kuwait now produces just under one billion barrels a year, and if reserves are found to be half of the announced figure, the bill -- if approved -- would halve current production.
Saadun has vowed to resubmit the bill in the next parliament if he is re-elected.
Several leading opposition candidates have actively campaigned against the energy minister and warned against reappointing him in the new cabinet after the elections.
Harami said he believes the emirate's basic oil policy, especially short-term, will not be affected if the minister is not reappointed, particularly regarding key projects like the planned fourth refinery and petrochemicals.
Another point of contention is the 8.5-billion-dollar investment to raise production of four northern oilfields to 900,000 bpd from around 600,000 now with the assistance of foreign oil majors, in what is called Project Kuwait.
Most opposition candidates are against the project, fearing that Kuwait's lifeline could fall into foreign hands. Lawmakers have managed to block the project for 12 years.
"They call it Project Kuwait. In fact it is a project to steal Kuwait and its wealth," Saadun told an election rally.
"I think Project Kuwait is in great doubt, especially if the opposition wins. I think both camps now realize that there is no urgent need to raise output because we have an abundant fiscal surplus," Bukhdour said.
AFP 26 1204 GMT 06 06
Copyright ©2006 AFP. All Rights Reserved.
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