US embassy cable - 02KUWAIT5296

S E C R E T KUWAIT 005296 
 
SIPDIS 
 
STATE FOR NEA/ARP AND EB/ESC 
 
E.O. 12958: DECL: 09/24/2012 
TAGS: PREL, PGOV, ENRG, ECON, KU, SA 
SUBJECT: QATAR GAS TO KUWAIT 
 
REF: SECSTATE 250977 
 
Classified By: Ambassador Richard H Jones for reasons 1.5 (B) and (D) 
 
1.(S) Post provides the following responses to questions 
posed in reftel. 
 
2.(S) What are the energy and economic (or political) 
implications for Kuwait if this deal does not go through? 
 
A.) The GOK is facing a significant electicity deficit in the 
next two to three years without significant additions to its 
generation capacity.  The next project due to come online is 
a gas turbine power station which the Kuwaitis hope to 
connect to the grid in 2003, and to power with Qatari gas 
starting in 2005.  The Kuwaitis are also working on two 
significant petrochemical projects, both of which are 
dependent on gas as a feedstock.  If Qatari gas is not 
available, all of these projects are at risk.  The political 
implications of a series of power outages could be quite 
significant. 
 
3.(S) Aside from timing and cost, are there other Kuwaiti 
concerns regarding the source of its supply, e.g., are 
ExxonMobil concerns about losing out to Iranian sources 
credible? 
 
A.) The Kuwaitis have engaged with the Iranians at various 
levels for years for many reasons.  We believe that the 
primary reason for entertaining the Iranians as a potential 
gas supplier was as a bargaining chip to keep the Qataris 
from being too rapacious.  The Kuwaitis will be reluctant to 
rely on the Iranians for gas -- they see the same corruption 
in Iran that we do, and given the confusing array of power 
centers in Iran, they will question the ability of any 
Iranian official to follow-through on a committment. 
However, having said that, many here would find Iran an 
attractive alternative for many reasons, including cost and 
political balance.  In short -- yes, ExxonMobil's concern is 
reasonable. 
 
4.(S)  Would Kuwait have no choice but to approach Iran for 
gas? (We note from other reporting that a Kuwaiti delegation 
was scheduled to travel to Tehran presumably to discuss a gas 
deal.) 
 
A.) Kuwait needs gas, as noted above.  After Qatar, Iran is 
clearly the most viable alternative in the short to medium 
term; Iran has the supplies and the distribution network that 
could easily be extended to reach Kuwait.  In the longer 
term, Iraq has the potential to supply Kuwait with gas, but 
there are too many uncertainties for this to be considered as 
a viable opportunity anytime soon. 
 
5.(S) Why has Kuwait not taken an equity interest in this 
project, either upstream or downstream? 
 
A.) Kuwait is currently looking for international oil 
companies to finance the development of its own petroleum 
sector, so it would be unlikely to invest inthe development 
of Qatar's energy sector.  ExxonMobil has told us it believes 
the GOK and/or KPC will take some small equity portion in the 
pipeline operator, once the deal is completed. 
 
JONES