Kuwait’s Political Crisis To Hold Up Energy Projects And Shell Investigation

Under intense political pressure Kuwait’s amir has appointed a new prime minister, and at MEES press time, he was expected to call new elections following the government's resignation on 28 November. The latest political crisis – the most severe for some years – is expected to further delay major energy projects and a parliamentary inquiry into Shell’s Jurassic gas contract, a Supreme Petroleum Council (SPC) member tells MEES. Nick Wilson reports.

In one of Kuwait’s largest protests in recent political history, tens of thousands of protesters took to the streets of Kuwait City on 28 November, demanding political reforms, a new prime minister and less corruption. Prime Minister Shaikh Nasir Muhammad al-Ahmad al-Sabah – the amir’s nephew – announced his government’s resignation – the seventh in five years – the same day. The Amir Shaikh Sabah al-Ahmad al-Sabah appointed outgoing Minister of Defense Shaikh Jabir al-Mubarak al-Sabah as the new prime minister on 30 November.

Earlier in the month protestors and opposition MPs had stormed parliament demanding Shaikh Nasir’s resignation. Fifteen members of the 50-member parliament have been reported to the public prosecutor over allegedly laundering a total of $350mn through their bank accounts with help from the Ministry of Foreign Affairs, according to the oppossition. It could take up to two months to form a new government and hold parliamentary elections.

The crisis may delay a $10bn-plus, 530,000 b/d capacity planned new refinery at al-Zour. State-owned Kuwait Petroleum Corporation (KPC) is waiting for the Audit Bureau’s approval before it puts the project to tender. The Audit Bureau – an independent body of government-appointed professionals – will put forward a technical recommendation.

“They have a history of raising a flag – last week they blocked a Kuwait City bridge, which is one of the country’s biggest infrastructure projects, because there had been no environmental study,” the SPC member says. Even if the Audit Bureau gives the tender a green light before the elections KPC is unlikely to move. “Considering the history of KPC they will wait until there’s a new parliament, government and oil minister before they go ahead,” he says.

A main goal of al-Zour is to produce desperately needed feedstock for Kuwait’s power station expansion program. Gas-deficient Kuwait imports LNG, is considering a nuclear power program and is building a 70mw capacity renewable energy complex at Abdeli near Iraq in the north.  

Northern Jurassic Impasse

The awarding to Shell by KPC’s upstream subsidiary of a consultancy contract – an Enhanced Technical Service Agreement – in 2010 was aimed at helping to start production of 600mn cfd of gas from the stalled Northern Jurassic gas fields project by the end of 2013. A three-year construction contract to build the project’s gas processing plant was awarded to Kuwaiti firm Kharafi National.

“The clock started ticking on it at the end of 2010, but so far they haven’t started,” a contractor tells MEES. “I don’t see how they can get it done on time.” The firm is still searching for project finance, and Shell has recommended the demolition of the existing processing plant – which did not meet the project’s needs – built by a previously contracted engineering firm.

In June the parliament forced the Ministry of Oil to launch an investigation, authorized by the SPC, into the Shell contract to see if it also gave Shell any operational control and if correct procedures were followed – it was not awarded through a bidding process (MEES, 4 July). The investigation was part of a deal under which parliament passed the KPC part of the national budget. Parliament set up a committee to run a parallel investigation, according to MP Rola Dashti, a committee member.

The SPC member says: “If parliament is dissolved the whole parliamentary investigation process will stop, but it is likely that a new parliament would continue [it]. There’s no reason why a new parliament would end it.” The investigation that the ministry is running will continue uninterrupted, he says.

© Copyright MEES 2011.