US embassy cable - 04KUWAIT295

C O N F I D E N T I A L SECTION 01 OF 02 KUWAIT 000295 
 
SIPDIS 
 
STATE FOR NEA/ARP, EB/ESC 
EB/CBA J. FRANK MERMOUD 
USDOC FOR 4520/ITA/MAC/OME 
 
E.O. 12958: DECL: 01/25/2014 
TAGS: EPET, ETRD, EINV, KU, IZ 
SUBJECT: (U) PROJECT KUWAIT: CHEVRONTEXACO BRIEFS SPECIAL 
REP. MERMOUD 
 
Classified By: CDA Frank C. Urbancic for reason 1.4 (d) 
 
1. (C) Summary: Special Representative for Commercial and 
Business Affairs J. Frank Mermoud met with ChevronTexaco 
Kuwait Manager Hani Iskander on January 13.  During the 
course of their conversation, the two discussed the status of 
Kuwait's long-delayed northern oilfields project (Project 
Kuwait) and ChevronTexaco's involvement in reconstruction 
efforts in Iraq.  End Summary. 
 
2. (C) In a frank discussion on January 13, ChevronTexaco 
Kuwait Manager Hani Iskander shared the history of his 
company,s current presence in Kuwait and details of GOK's 
announced plans to further develop Kuwait's northern 
oilfields.  (Note: The 5 northern oilfields, 2 of which 
straddle the Iraqi border, have estimated reserves of 7 
billion barrels.  End Note.)  Since 1994, ChevronTexaco has 
held a contract for the management of Kuwait's Burgan oil 
field - the second largest in the world - and maintains a 
total presence of 40 employees in Kuwait.  Iskander described 
the contract as a "stepping stone" the company was hoping 
would pay off if and when Kuwait finally decides to implement 
plans to upgrade its northern oil fields. 
 
3. (C) Iskander said ChevronTexaco wrote the first proposal 
for Project Kuwait in 1998.  He said its structure was well 
received and has since been largely adopted by the GOK.  The 
proposal called for an operating services agreement whereby 
the winning company would invest heavily in upgrading the 
technology of the northern fields and receive a fixed fee for 
each barrel pumped.  ChevronTexaco estimates this arrangement 
could double production on the three northern oilfields 
within four years. 
 
4. (C) Iskander said the delay in the project, which has yet 
to be officially tendered, is due to a dearth of vision 
amongst Kuwait's leadership, opposition in the National 
Assembly to subjecting national petroleum assets to any real 
or perceived foreign influence and a blase attitude toward 
reserves.  Iskander estimates that despite official 
statistics asserting Kuwait has pumped half of its oil 
reserves, that in fact less than 1/3 remains. (Note: At 
current production levels, it is officially estimated by the 
GOK that Kuwait has up to 100 years of reserves remaining; 
Iskander believes this is a very inflated estimate.  End 
Note.)  Adding to this is the tribal nature of Kuwaiti 
society, which can lead to great inefficiency. Iskander said 
a high-ranking Kuwait Petroleum Company (KPC) executive 
recently confided to him that he spends 40% of his time on 
personnel issues (i.e. job requests) driven by tribal 
interests. 
 
5. (C) Chevron leads a bidding consortium of companies to bid 
on the project that includes Total, Petro-Canada, Sibneft, 
Sinopec and itself.  Its main competitor on the project is 
BP, which he said now claims to be a US company, on account 
of its US holdings, in an effort to obtain official USG 
advocacy (or neutralize advocacy on behalf of ChevronTexaco). 
 Asked who was the ultimate arbiter in deciding if and how 
Project Kuwait would move forward, Iskander unequivocally 
named Prime Minister Shaykh Sabah Al-Ahmed Al-Sabah.  He 
noted that both Secretary of Commerce Evans and Secretary of 
Energy Abraham had delivered letters to Shaykh Sabah in the 
summer of 2003 asking for action on the project.  According 
to Iskander, "the response was 'yes, we're moving."  However, 
there has been no further action. 
 
Iraq 
 
6. (C) On ChevronTexaco's plans for possible involvement in 
Iraq, Iskander said the company had already rented a house in 
Baghdad and hired an Arabic-speaking British counter 
terrorism analyst to monitor the security situation inside 
the country.  Iskander said he had met with Iraqi Oil 
Minister Bahr al-Oloum and agreed to assist the Ministry in 
technical matters, but will not move any substantial number 
of employees there until the security situation improves and 
a legal infrastructure is established (i.e. not until after a 
sovereign Iraqi government takes over). 
 
7. (C) Despite these prerequisites, Iskander said 
ChevronTexaco does plan to have a long-term presence in Iraq. 
 The company has sent 12 Iraqis to Houston for extensive 
training and plans to send 3 to California annually for 
training at ChevronTexaco facilities there.  Responding to a 
request from Mr. Mermoud to publicize these training 
programs, Iskander promised to contact his headquarters and 
provide an answer soon. 
 
8. (U) Mr. Mermoud was not able to clear on this cable before 
departing. 
URBANCIC