US embassy cable - 05KUWAIT3173

C O N F I D E N T I A L SECTION 01 OF 02 KUWAIT 003173 
 
SIPDIS 
 
LONDON FOR TSOU 
STATE FOR NEA/ARPI 
STATE PLEASE PASS DEPARTMENT OF ENERGY FOR IE 
EB/ESC/IEC FOR GALLOGLY, DOWDY 
 
E.O. 12958: DECL: 07/18/2015 
TAGS: EPET, ENRG, PINR, KU, OIL SECTOR 
SUBJECT: MIN ENERGY UNDERSECRETARY ON OIL PRICES AND ENERGY 
COOPERATION 
 
REF: KUWAIT 0943 
 
Classified By: CDA Matthew Tueller for reason 1.4 (b) 
 
1.  (C) At a July 16 meeting with Charge, Ministry of Energy 
Undersecretary Issa Al-Own voiced his concerns about the 
"NOPEC" legislation and described three problems keeping 
world oil prices high: lack of refining capacity; market 
uncertainty in major producing countries such as Iraq and 
Venezuela; and traders who are continuously betting on higher 
prices.  He asked for increased cooperation and dialogue on 
energy issues with U.S. counterparts, and described a newly 
proposed "GCC Center for Strategic Studies" that would act as 
an "energy think tank" and look at how the energy sector 
affects overall development in the GCC.  Al-Own will attend 
an energy conference in Houston in late September and hopes 
to stop in Washington for meetings with DOE counterparts to 
discuss a periodic dialogue.  When Al-Own noted the 
difficulties on engaging with Iran on energy issues, Charge 
emphasized our concerns about Iran's nuclear ambitions and 
noted that it should also be of concern to Iran's neighbors. 
 
Concerned About "NOPEC" 
----------------------- 
 
2.  (C)  Charge met July 16 with Ministry of Energy 
Undersecretary Issa Al-Own per Al-Own's request to "chat" 
about a number of issues.  (Note: Al-Own also raised his 
son's pending student visa, which would allow him to finish 
his last year of college.)  Also joining the meeting was Econ 
Officer and Ministry of Energy Director of Planning and 
International Relations Ahmad Al-Sairafi.  Al-Own started the 
conversation by noting his, and the GOK's, concern about the 
"NOPEC" legislation recently introduced in the U.S., allowing 
for anti-trust lawsuits against OPEC countries.  He said that 
the issue would be raised at the upcoming July meeting of the 
OPEC Strategic Committee and that there was "concern among 
committee members."  Al-Own said that he thought that OPEC 
had become a "positive factor in oil prices" and added that 
"(previous) positions held by countries like Iran and Libya 
were not sustainable" or realistic.  He said that the 
Strategic Committee would present its long term strategy to 
OPEC by the end of the year. 
 
Why Oil Prices Are High 
----------------------- 
 
3.  (SBU) Al-Own identified three specific reasons for the 
current high oil prices.  First, he said, is the lack of 
refining capacity in the U.S. and other consumer countries. 
In this context, he noted that Kuwait plans to have its 
fourth refinery come online by 2009, with a daily refining 
capacity of 600,000 barrels.  The second reason for the high 
oil prices, he said, is the uncertainty surrounding some of 
the major producing countries, such as Iraq and Venezuela. 
He estimated that it would take Iraq ten years to became a 
major producer, and that the country would not produce much 
more than 2.5 mbpd until then.  The third reason he cited for 
high oil prices was that oil was being traded as a commodity 
and "the traders are keeping prices high."  He asked 
rhetorically, "How can 160 mbpd be traded on world markets, 
when only 80 mbpd is consumed and produced?" 
 
Increased Energy Dialogue: Bilat Meetings and "Strategic 
Studies Center" 
--------------------------------------------- ----------- 
 
4.  (C) On the topic of increasing dialogue between consuming 
and producing nations, Al-Own said that the Ministry of 
Energy was already having annual meetings with UK 
counterparts, and that this was initiated through the British 
Embassy in Kuwait.  He said that the MoE would like to start 
the same type of ongoing dialogue with the U.S. Department of 
Energy, starting with a MoE trip to Washington.  At the same 
time, Al-Own said, the GOK was hoping to soon formalize a new 
"GCC Center for Strategic Studies", which would act as an 
"energy think tank" for the GCC.  The Ministry of Energy was 
hoping to locate the headquarters of this new Center in 
Kuwait, but he said that Saudi Arabia also wanted to host it. 
 The compromise might be to host the strategic part in Kuwait 
and the technical part in the KSA, he said.  He described 
this proposed Center as "the best way to deal with the 
challenges of the oil and gas sector" and said that it would 
"provide support to decision makers throughout the GCC." 
 
5.  (C) While Al-Own said that the Center would be for the 
whole GCC, he added that it was largely backed by the four 
countries with the most oil and gas resources: KSA, Kuwait, 
UAE and Qatar.  He said that the backers of the Center had 
already met with a number of international think tanks and 
academic institutions and asked them to participate, and that 
he was most impressed with the Center for Strategic and 
International Studies (CSIS).  He said that one or more of 
these think tanks would be given a consulting contract and 
that the core team of researchers would be from the GCC. 
Al-Own said that the proposal for the Center would be 
presented to the appropriate GCC ministers in September or 
October and then to the GCC leadership in December for final 
approval.  Al-Own asked for Embassy support for the Center, 
specifically in helping to attract American think tanks to 
become involved. 
 
Iran: Money for Al-Durra, But Waiting on Political Deal 
--------------------------------------------- ---------- 
 
6.  (C) When asked about Kuwait's energy negotiations with 
Iran, Al-Own said that he has been given a budget each year 
for the past three years to drill for gas in the offshore 
Al-Durra field (reftel), but that he could not go ahead 
without the two sides coming to a political settlement over 
the continental shelf boundaries between Iran and Kuwait.  He 
added that the Ministry of Energy has asked Foreign Minister 
Shaykh Dr. Mohammad Al-Sabah for engagement with Iran on this 
issue, but he has not seen any recent movement.  Charge 
emphasized USG concerns about Iran's nuclear ambitions and 
noted that it should also be of concern to Iran's neighbors, 
especially from an environmental perspective. 
 
Bio Data, and the Story of Grandmother and the Picture of 
Bush Sr. 
--------------------------------------------- ------------ 
 
7.  (SBU) Al-Own is a graduate of Iowa State University, and 
has a son currently finishing his Chemical Engineering degree 
at the University of Ohio, Youngstown.  He speaks excellent 
English.  At this meeting, in an aside comment, Al-Own said 
that "the Kuwaiti people have a true belief that the U.S. 
(military) presence in this region is a factor for 
stability."  He then went on to tell a story about his 
deceased grandmother.  After the U.S. liberated Kuwait during 
the Gulf War, Al-Own's grandmother put a picture of President 
George Bush Sr. up on her wall.  She kept it there for many 
years, and she told her children, "When I die, do not take 
that picture down."  She passed away a few years ago, Al-Own 
said, but while he has renovated her old room and changed 
everything else, he has left that picture there, "because she 
asked us to." 
 
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TUELLER