US embassy cable - 05KUWAIT650

C O N F I D E N T I A L SECTION 01 OF 02 KUWAIT 000650 
 
SIPDIS 
 
STATE PLEASE PASS DEPARTMENT OF ENERGY FOR IE 
STATE FOR NEA/ARPI 
EB/CBA FOR J.F. MERMOUD, W. BEHRENS 
EB/ESC/IEC FOR GALLOGLY, DOWDY 
USDOC FOR 4520/ITA/MAC/AME, 3131/USFCS/OIO 
 
E.O. 12958: DECL: 02/15/2005 
TAGS: EPET, BEXP, ECON, KU 
SUBJECT: NATIONAL ASSEMBLY MEMBERS POSITIVE ON NORTHERN 
OILFIELDS PROJECT APPROVAL 
 
REF: A. KUWAIT 0326 
     B. 2004 KUWAIT 4556 
 
Classified By: Ambassador Richard LeBaron for reason 1.4 (d) 
 
1.  (C) Summary and Comment: During January and February, 
Ambassador met with five prominent MPs and discussed the 
Kuwait Project to develop the northern oilfields and the 
associated enabling law, which will come before a vote in the 
National Assembly soon.  The MPs were generally supportive of 
the GOK's efforts to pass an enabling law allowing for 
foreign investment in Kuwait's oil industry, but wanted to 
make sure that they received all the details of the Kuwait 
Project and wanted to ensure that the National Assembly had 
its say.  It is post's understanding that the Kuwait Project 
enabling law could come up for a vote as early as March or 
April.  Comment:  We are in continuous contact with the U.S. 
companies interested in this major project.  They are 
ChevronTexaco, ExxonMobil (both as consortium leaders) and 
Occidental Petroleum (as a member of BP's consortium.)  Their 
use or non-use of agents has been based on their own business 
decisions and practices.  Their main concern is that the GOK 
will make the margins so thin on the project that they will 
not be in a position to respond to the RFP, expected in 
April.  End Summary and Comment. 
 
Kuwait Project: MPs Supportive, with Some Reservations 
--------------------------------------------- --------- 
 
2.  (U) In meetings with leading MPs throughout January and 
February, the Ambassador heard varying levels of support for 
the enabling law allowing for foreign investment in Kuwait's 
oil sector.  The Ambassador emphasized the level of expertise 
and quality that U.S. companies would bring to the Kuwait 
Project and asked for clarification on various points, 
including the use of agents. 
 
3.  (C) Liberal MP Abdulwahab Al-Haroun told the Ambassador 
that the documents had been given to the Economic and Finance 
Committee at the end of December and that the committee would 
study the documents for about two months and then present its 
findings to the full National Assembly (Ref B).  Independent 
MP Abdullah Al-Roumi, a moderate who is not part of this 
committee, said that he has not yet seen any of the documents 
but that he is not against it.  He said that his problem in 
the past, when the National Assembly earlier rejected the 
enabling law, was a "technical one," and that "if the 
technical people say we need this, I support it."  He told 
the Ambassador that the use of agents was canceled in the 
enabling law, as per the request from the GOK, in order to 
remove the possibility of people "taking advantage of the 
money situation."  (Note: In fact, the current proposal makes 
use of a Kuwaiti agent optional.)  Moderate Shi'a Islamist MP 
Yousef Al-Zalzalah, who is on the committee with Al-Haroun, 
said that he "knows the issue well," and that he thinks the 
current package is "excellent."  He said that he recognized 
Kuwait's need to bring in outside technical expertise but on 
the condition that Kuwaiti employees get trained in the more 
difficult technical skills.  He said that pressure from the 
MPs had brought a contract that the MPs could agree on, but 
could not say whether the vote on the enabling law would be 
close or overwhelming.  He said that the GOK was "expediting 
the issue," echoing what post has heard from contacts 
throughout the oil industry and elsewhere.  While Sunni 
Islamist MP Nasser Al-Sane raised complaints about 
transparency and the way the GOK had previously presented the 
Kuwait Project to the MPs, he conceded that the Kuwait 
Project would likely be approved, albeit with "a lot of 
noise." (Ref A)  (Comment: Al-Sane and his Islamic 
Constitutional Movement (ICM) bloc may be more inclined to 
support the law and Kuwait Project now that Ahmed Al-Arbeed, 
himself an ICM member and an Islamist, has been named 
Managing Director of the Kuwait Project division of KPC and 
is actively lobbying for approval of the project.) 
 
4.  (C) GOK oppositionist and long-time opponent of the 
project MP Ahmed Al-Saadoun staked out a position that was 
clearly against the enabling law and the Kuwait Project, but 
he seemed to be most concerned about technical details 
concerning the production levels in the northern oilfields. 
He said that since the main argument for the project in the 
past had been to secure Kuwait's northern border from further 
aggression from Saddam Hussein, the argument that it was now 
based on technical issues must be convincing.  While the GOK 
has claimed that the current production of the concerned 
fields is 450,000 bpd and that investment and development by 
international oil companies (IOCs) would raise the production 
to 900,000 bpd, Al-Saadoun said that he believed production 
at these fields has already reached 650,000 bpd and could 
reach 750,000 bpd, without any additional outside investment. 
 Al-Saadoun wants the GOK to submit the actual Kuwait Project 
contract to the MPs as a law, rather than just an enabling 
law allowing for KPC to sign such contracts.  He said that he 
did not think the GOK was being completely transparent about 
the project and he did not seem convinced by the recent 
presentations made to MPs by KPC and the Minister of Energy. 
He said that if the project did proceed, it should do so 
without agents, because agents bring "abnormal pressures 
rather than an exchange of interests" and the "pressures from 
agents of companies raise questions about the intentions of a 
company." 
 
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Visit Embassy Kuwait's Classified Website: 
http://www.state.sgov.gov/p/nea/kuwait/ 
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LEBARON