Jan 03 2011 |
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Economic policy: More promises are made on oil investment
Kuwait will spend US$90bn on the oil sector over the next five years according to Hashim al-Refaai, head of planning at Kuwait's state-owned oil company, the Kuwait Petroleum Corporation ( KPC ). Investments are to include the building of a new US$14bn refinery and the upgrading of existing refineries. Kuwait aims to raise total oil production from 2.3m barrels/day (b/d) at present—current capacity is around 3m b/d—to 3.5m by 2015 and 4m by 2020. According to local press reports, Kuwait has discovered 12bn barrels of crude oil at the Greater Burgan oilfield, which is the second-largest in the world, adding to current reserves, which stand at over 100bn barrels.
Converting reserves into actual production has been far more difficult, however, owing to political and bureaucratic constraints. Opposition MPs have been calling for a removal of the oil and information minister, Sheikh Ahmed Abdullah al-Sabah, following his appointments to the KPC , which critics claim ignored their proposals. Mr Refaai's statements come on the back of a failure to deliver, despite repeated promises to increase spending on Kuwait's ageing oilfields and oil infrastructure and abortive attempts at partnerships with foreign companies. In March 2009 Kuwait scrapped the Al Zour refinery project after awarding contracts to a Japanese and Korean consortium on the basis of parliamentary opposition that claimed a lack of transparency in the tendering process. Similarly, parliamentary opposition at the end of 2008 contributed to the scrapping of a US$17.4bn agreement with US-based Dow Chemical to establish a petrochemicals joint venture. Considering renewed tensions between parliament and the government and past performance, Mr Refaai's stated goals may remain difficult to achieve. Ultimate decision-making power rests with the Supreme Petroleum Council, which will need to approve the projects put forward by the KPC before they can be implemented.
Kuwait's deputy prime minister for economic affairs, Sheikh Ahmed Fahad al-Sabah, announced in November that 25% of the projects proposed as part of a KD30.8bn (US$110bn) 2010-14 five-year development plan launched in April have been implemented. A total of US$3.2bn (out of US$17.7bn earmarked for the first year of the plan) has been committed to projects so far and contracts for eight of the proposed 14 megaprojects have been signed. The plans include improved transport infrastructure, power stations, new business hubs, and health and education spending. However, renewed tensions between parliament and government may derail progress on the diversification agenda.
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