US embassy cable - 05KUWAIT936

C O N F I D E N T I A L KUWAIT 000936 
 
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: 03/07/2015 
TAGS: EPET, ENRG, BEXP, KU, OIL SECTOR 
SUBJECT: KUWAIT PROJECT (NORTHERN OILFIELDS) STATUS: 
NATIONAL ASSEMBLY DELIBERATES, COMPANIES IN WAITING GAME 
 
REF: A. KUWAIT 0650 
     B. KUWAIT 0568 
     C. 2004 KUWAIT 4556 
 
Classified By: Ambassador Richard LeBaron for reason 1.4 (d) 
 
1.  (U) March 2005 newspaper reports and conversations with 
post interlocutors show continued progress by the National 
Assembly's Financial and Economic Affairs Committee on 
studying the enabling law allowing for outside investment in 
the petroleum sector.  If passed, the law would allow for the 
Kuwait Petroleum Company (KPC) to sign an operator service 
agreement with one of the consortia bidding on the 
development of the northern oilfields, otherwise known as the 
Kuwait Project (reftels).  U.S. companies, specifically 
ChevronTexaco and ExxonMobil, lead two of the consortia, 
while Occidental Petroleum is an investing partner in a third 
led by BP.  Representatives of the companies are mostly in a 
"wait-and-see" holding pattern as pieces of information 
dribble out from the National Assembly's deliberations. 
 
2.  (C) Ambassador spoke to ChevronTexaco General Manager 
Hani Iskander on March 5.  Iskander was encouraged by 
statements by National Assembly Chairman of the Financial and 
Economics Affairs Committee Abdulwaheb Al-Haroun in favor of 
the project.  Iskander's main concern at this point is the 
requirement that bids be submitted as a single figure with no 
technical back-up.  He explained that this will encourage the 
successful bidder to maximize quick rather than sensible 
exploitation of the reservoir. 
 
3.  (C) ExxonMobil Kuwait President John Hoholick described 
himself as being in a "holding pattern," watching things 
develop in the press.  He did not express any specific 
concerns and actually sounded a bit optimistic about movement 
of the enabling law through the National Assembly.  He said 
he had it on good sources that the Minister of Energy had 
"vowed to get the bill passed during this session of 
Parliament."  He said that Kuwait Project Managing Director 
Ahmed Al-Arbeed is still actively "educating the public" and 
he did not think that there was much that any of the 
companies or the Embassy could do at this point other than 
watch and wait.  He said that he received a letter from the 
Minister of Energy saying that the Minister would like to 
meet with the ExxonMobil Chairman sometime during April to 
"discuss matters of mutual concern to our two countries."  He 
is not quite sure what to make of this and is going to check 
with KPC Chairman Hani Hussein and other IOC execs to see if 
others have received the same letter. 
 
4.  (C) David Scott, Occidental Petroleum VP, told 
EconOfficer March 7 that he had heard that the "terms had 
become a bit leaner" and that it would make it a "harder 
sell" to his superiors for OXY to be involved.  He thanked 
Post for continued support for, and advocacy on behalf of, 
all of the American companies bidding on the project.  He 
asked that Post continue to urge the Ministry of Energy to 
move the project forward and asked that Post press the 
Ministry to release a timeline on the bidding process, so 
that OXY and the other companies could plan and shift 
resources as needed.  He also asked that Post continue to 
press for transparency throughout the bidding process. 
 
******************************************** 
Visit Embassy Kuwait's Classified Website: 
http://www.state.sgov.gov/p/nea/kuwait/ 
******************************************** 
LEBARON