Kuwait seeks foreign help to boost oil output as war threat grows

Dec 17, 2002 01:00 AM

Kuwait's state-run oil industry expects to ask as many as five foreign companies -- two of them American -- to help form a consortium for producing crude, giving foreigners their first opportunity since 1975 to participate in the emirate's No. 1 business.
Kuwait is pushing ahead with its plan to boost crude output in spite of a looming US-led attack on Iraq and the threat of a possible Iraqi retaliation on Kuwait's oil facilities, the acting Kuwaiti Oil Minister Sheik Ahmed Fahd Al Ahmed Al Sabah said. Kuwait needs the technical expertise of foreign firms to help meet its goal of more than doubling its petroleum output to 4 mm bpd by 2010, Al Sabah said. "Maybe we can do it all with our technology, but I think it will be less economic if we do it in on our own," he told.

An international consortium would be a milestone for Kuwait's domestic oil industry. The country has relied on its own resources in exploration and production since nationalizing the industry 27 years ago. Kuwait has 96.5 bnbarrels in proven reserves -- the world's fourth-largest, according to the authoritative BP statistical review of world energy. It currently pumps about 1.8 mm bpd.
But as Kuwait depletes its underground deposits, its remaining crude becomes more difficult to reach. More than 30 foreign companies have expressed interest in applying advanced techniques of injecting water, steam or gas to help extract hard-to-reach oil in northern Kuwait. The ministry hopes by February 2004 to select three to five of these companies to form a consortium.
"It will be an international mix," Al Sabah said.

The ministry has compiled two lists of foreign firms -- one list for companies that want to oversee or operate the projects, and another for companies that want to provide support services. "I think there will be one American (company) in each group," Al Sabah said.
Among the companies listed are ChevronTexaco and ExxonMobil of the United States. Also included are BP, Shell Group and TotalFinaElf from Europe, Sibneft of Russia and Malaysia's Petronas, the minister said.

Kuwait expects the consortium to invest $ 6 bn in three areas close to the Iraqi border -- Abdali, Ratqa and Rawdatain. In addition, the country aims to start producing oil in new offshore areas of the Gulf, Al Sabah said.
However, Kuwait's constitution bars foreign companies from owning oil and other natural resources. For this reason, the Kuwaiti parliament must first pass a law that would let foreigners produce oil by letting them charge fees for their services rather than take a share in any oil produced. Al Sabah said he hoped the parliament would pass such a law by July of next year.

Kuwait Oil chairman Ahmed al-Arbeed has said some lawmakers have expressed the fear that a deal with international oil companies would amount to a surrender of national sovereignty. Parliament has demanded a say in the highly emotional issue of foreign involvement in Kuwait's oil industry. The government is trying to persuade lawmakers that foreign firms would gain no ownership rights to oil under the proposed law. The legislature has yet to debate the bill.
"Now they see there are ways to use international oil companies without giving up sovereignty over your own resources," said al-Arbeed, whose company is responsible for all oil exploration and production in Kuwait.

Source: AP Worldstream
Alexander's Commentary

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