26 August 2008
KUWAIT: The Council of Ministers yesterday decided to refer the giant fourth refinery project to the Audit Bureau for assessment, bowing to mounting political pressure from MPs, who welcomed the measure as a step in the right direction. The decision came during the Cabinet's weekly meeting and was based on a recommendation by Oil Minister Mohammad Al-Olaim, the Foreign Minister and Acting State Minister for Cabinet Affairs Sheikh Mohammad Al-Sabah said.
Sheikh Mohammad said the Cabinet ordered Kuwait National Petroleum Company (KNPC), which owns all refineries in the country, to refer all documents and data related to the refinery project to the Audit Bureau to allow it to assess the project with regards to its legal and financial aspects. The Cabinet's decision came following a wave of objections by MPs, some of whom threatened to question the oil minister, while the opposition Popular Action Bloc threatened to grill "any member of the government".
The objections were based on the fact that the contracts for the new refinery at Al-Zour were awarded outside the Tenders Law and the Central Tenders Committee (CTC). In May, KNPC awarded four contracts to four South Korean and a Japanese firm worth over $8 billion dollars. A fifth contract was awarded without competition to US' Fluor Engineering, which also acts as a consultant for the project.
The project, for which the government has earmarked KD 4 billion, has been delayed several times in the past. In late 2006, KNPC invited bids from international oil companies for the project after estimating its cost as KD 1.85 billion. The tenders were later scrapped after offers came in at over KD 5 billion. KNPC later invited new bids but this time on the cost plus basis, which means that the company would pay the actual cost to foreign firms in addition to an agreed profit margin.
But the bidding process avoided the CTC and the Tenders Law, with the minister insisting that oil companies do not fall under the law or CTC. Several MPs raised questions about the bidding process and awarding of the contracts, saying the process violated the law and involved suspicion of squandering public funds. They urged the government to refer the project to the Audit Bureau, the state's accounting watchdog, to scrutinize its legality and other financial aspects.
Following the Cabinet decision, a number of MPs said it will help defuse political tension. MP Abdullah Al-Barghash said the decision was the correct measure because the Audit Bureau is an independent body and is trusted by all parties. But he warned that this does not put an end to the problem as "we have to wait for the Bureau's report". "If the Bureau clears the project, we will support it", Barghash said.
MP Hassan Jowhar said the decision has put the refinery project in the right path and hoped the measure would end the political standoff between the Assembly and the government. He said that the project is one of the largest development projects in the country and the most costly, adding that the decision should make all parties wait until the Audit Bureau issues its verdict. MP Roudhan Al-Roudhan said he has decided to freeze his threat to grill the oil minister until after the Audit Bureau's report.
Kuwait plans to boost refining capacity to 1.415 million bpd from around 930,000 bpd with the new plant and upgrades to two other refineries. Al-Zour is scheduled to start operating in 2012, two years later than initially planned. The refinery will be one of the world's largest and will replace the state's ageing 200,000 bpd Shuaiba plant.
KUWAIT: The Council of Ministers yesterday decided to refer the giant fourth refinery project to the Audit Bureau for assessment, bowing to mounting political pressure from MPs, who welcomed the measure as a step in the right direction. The decision came during the Cabinet's weekly meeting and was based on a recommendation by Oil Minister Mohammad Al-Olaim, the Foreign Minister and Acting State Minister for Cabinet Affairs Sheikh Mohammad Al-Sabah said.
Sheikh Mohammad said the Cabinet ordered Kuwait National Petroleum Company (KNPC), which owns all refineries in the country, to refer all documents and data related to the refinery project to the Audit Bureau to allow it to assess the project with regards to its legal and financial aspects. The Cabinet's decision came following a wave of objections by MPs, some of whom threatened to question the oil minister, while the opposition Popular Action Bloc threatened to grill "any member of the government".
The objections were based on the fact that the contracts for the new refinery at Al-Zour were awarded outside the Tenders Law and the Central Tenders Committee (CTC). In May, KNPC awarded four contracts to four South Korean and a Japanese firm worth over $8 billion dollars. A fifth contract was awarded without competition to US' Fluor Engineering, which also acts as a consultant for the project.
The project, for which the government has earmarked KD 4 billion, has been delayed several times in the past. In late 2006, KNPC invited bids from international oil companies for the project after estimating its cost as KD 1.85 billion. The tenders were later scrapped after offers came in at over KD 5 billion. KNPC later invited new bids but this time on the cost plus basis, which means that the company would pay the actual cost to foreign firms in addition to an agreed profit margin.
But the bidding process avoided the CTC and the Tenders Law, with the minister insisting that oil companies do not fall under the law or CTC. Several MPs raised questions about the bidding process and awarding of the contracts, saying the process violated the law and involved suspicion of squandering public funds. They urged the government to refer the project to the Audit Bureau, the state's accounting watchdog, to scrutinize its legality and other financial aspects.
Following the Cabinet decision, a number of MPs said it will help defuse political tension. MP Abdullah Al-Barghash said the decision was the correct measure because the Audit Bureau is an independent body and is trusted by all parties. But he warned that this does not put an end to the problem as "we have to wait for the Bureau's report". "If the Bureau clears the project, we will support it", Barghash said.
MP Hassan Jowhar said the decision has put the refinery project in the right path and hoped the measure would end the political standoff between the Assembly and the government. He said that the project is one of the largest development projects in the country and the most costly, adding that the decision should make all parties wait until the Audit Bureau issues its verdict. MP Roudhan Al-Roudhan said he has decided to freeze his threat to grill the oil minister until after the Audit Bureau's report.
Kuwait plans to boost refining capacity to 1.415 million bpd from around 930,000 bpd with the new plant and upgrades to two other refineries. Al-Zour is scheduled to start operating in 2012, two years later than initially planned. The refinery will be one of the world's largest and will replace the state's ageing 200,000 bpd Shuaiba plant.
By B Izzak
© Kuwait Times 2008
