US embassy cable - 02KUWAIT5464

C O N F I D E N T I A L KUWAIT 005464 
 
SIPDIS 
 
STATE FOR NEA/ARP AND EB/ESC 
USDOC FOR 4520/MAC/AME 
USDOC FOR 3131/USFCS/OIO/ANESA 
USDOE FOR IE - C.WASHINGTON AND L.COBURN 
TREASURY FOR OASIA 
 
E.O. 12958: DECL: 12/21/2007 
TAGS: EPET, EINV, KU 
SUBJECT: KUWAIT: SENIOR ADVISOR ON STATUS OF PROJECT KUWAIT 
 
REF: A. (A) KUWAIT 5415 
 
     B. (B) KUWAIT 5109 
 
Classified By: Ambassador Richard H. Jones for reasons 1.5 (B) and (D) 
 
1.(C) On 21 December, EconChief met with Khalid Yousef Fulaij 
(strictly protect), who serves as an Advisor on Petroleum 
Affairs in the Office of the Chairman of Kuwait's Supreme 
Petroleum Council (SPC). The current chairman of the SPC is 
Foreign Minister and de facto Prime Minister Sheikh Sabah 
Al-Ahmed Al-Jaber Al-Sabah.  EconChief asked about the status 
of Project Kuwait for the development of the country's 
northern oil fields (reftel B). 
 
2.(C)  Fulaij explained that since the Spring of 2002, SPC 
action on the project had been delayed for many reasons, 
citing specifically the parliamentary 'grilling' of the 
Minister of Finance, summer holidays, and the selection of a 
few new members for the SPC in July.  However, he said, since 
September the SPC's technical subcommittee on the project has 
been meeting weekly to review the project and its terms. 
Fulaij reported that review of the financial terms for the 
project was now complete, and that the draft contractual 
arrangements were now the focus. He predicted that this 
review should be completed sometime in the month of January. 
 
3.(C) Fulaij said that once the SPC technical subcommittee 
had finalized its work, the approval of the full SPC was a 
simple procedure (noting that the technical committee 
comprised seven of the fourteen members of the full SPC). 
Once the full SPC had approved the drafts, the drafts would 
be shared with the international oil companies (IOCs) that 
were pursuing the project.  This effort would not, however, 
be intended to solicit formal proposals or bids from the 
companies, but rather as a step to ensure companies remained 
interested in and committed to the project.  Fulaij explained 
that firms would be asked to comment on the terms and 
conditions, but he did not specify what would be done with 
the responses (presumably they would be used to refine the 
terms and conditions of the deal). 
 
4.(C) Fulaij commented that he did not believe the Government 
would work with the current National Assembly to secure 
passage of the implementing legislation for Project Kuwait, 
saying that the current legislative calendar is already too 
full.  Indeed, he said that Sheikh Sabah was asking whether 
implementing legislation was even needed, since IOCs would 
never take title to the oil.  He compared the IOC role to 
that of oilfield service companies, whose contracts are not 
ratified by the National Assembly. 
 
5.(C) When EconChief stressed the importance of prompt 
action, Fulaij said he understood the impatience of IOCs.  He 
noted that Sheikh Sabah was also impatient, and regularly 
asked about the status of the project. 
 
6.(C) Comment:  Post is not sure how to square Fualij's 
comment that action with this National Assembly is not 
forthcoming and the acting Oil Minister's assertion (reftel 
A) that Project Kuwait would be approved before his term as 
Minister ended.  The suggestion that parliamentary approval 
will not be sought is one possible explanation, but with 
relations already so poor between the Government and the 
National Assembly, we believe this move would only poison the 
relationship further.  Boiling it all down, we believe the 
government remains fully committed to the project, but is so 
flustered with other pressing matters and with the obstinacy 
of the National Assembly that it can't find a way to make the 
project a priority.  End Comment. 
JONES