Kuwait, which has strict controls on foreign investment, especially in its oil industry, has in the past few years begun to open the door a little to foreign investors in the form of something called Project Kuwait:
In March 2001, Kuwait's national assembly passed the "Foreign Direct Investment Act," which aimed at promoting foreign investment. Among other things, the Act eased restrictions on foreign banks, provided long-term protection to foreign investors against nationalization or confiscation, and eliminated the requirement for foreign companies to have a Kuwaiti sponsor or partner. In the oil sector, the Kuwaiti constitution forbids foreign ownership of Kuwait's mineral resources, but the Kuwaiti government is exploring allowing foreign investment in upstream oil development under terms . . . which provide for per-barrel fees to the foreign firms rather than traditional production sharing agreements (PSA's). The Kuwaiti government is currently making an attempt to enact legislation to facilitate foreign investment in the upstream oil sector, as part of its "Project Kuwait" initiative to boost production capacity. The Kuwaiti parliament is expected to act on the proposed legislation sometime in 2005. . . .
"Project Kuwait" is a $7 billion, 25-year plan, first formulated in 1997 by the SPC, to increase the country's oil production (and to help compensate for declines at the mature Burgan field), with the help of international oil companies (IOCs). In particular, Kuwait aims to increase output at five northern oil fields -- Abdali, Bahra, Ratqa, Raudhatain, and Sabriya (Kuwait's third largest field) -- from their current rate of around 650,000 bbl/d to 900,000 bbl/d within three years. Project Kuwait has been repeatedly delayed, however, due to political opposition and resistance from nationalists and Islamists in parliament to the idea of allowing foreign companies into the country's oil sector. Legislation which would facilitate Project Kuwait has been introduced again in the Kuwaiti parliament in early 2005. The bill was approved by the Finance and Economic Committee in June 2005, but with amendments limiting its scope to four of the five fields, excluding Bahra. Final action on the bill by the full parliament is still pending, but is expected by the end of 2005.
In February 2003, KPC completed a draft contract and proposed financial terms for Project Kuwait. There are three major consortia competing for the project, led by: 1) ChevronTexaco (along with Total, PetroCanada, Sibneft and Sinopec); 2) ExxonMobil (along with Shell, ConocoPhillips, and Maersk); and 3) BP (along with Occidental, ONGC/Indian Oil Corp.). Reportedly, KPC prefers to have three groups working under three separate IBBCs: one for Raudhatain and Sabriya (the largest IBBC); one for Ratqa, Bahra and Abdali; and one for Minagish and Umm Gudair. Currently, foreign companies like BP, Shell, and ChevronTexaco operate in Kuwait strictly under service contracts (SCs).
Alexander's Gas & Oil Connection (2003) has more detail:
One consortium is led by US major ChevronTexaco, which is the operator and has a 50 % stake. France's Total is the second operator and has a 20 % stake. The consortium's non-operating partners are PetroCanada, Sibneft and Sinopec, each having a 10 % stake.
A second consortium is led by the UK's BP as operator with a 65 % stake, and includes the US' Occidental Petroleum and India's Indian Oil Corporation as non-operators. A third consortium is led by US major ExxonMobil as first operator with a 37.5 % stake. Shell is the consortium's second operator with a 32.5 % stake. US firm ConocoPhillips and Denmark's Maersk are non-operating participants.
I think it's really sweet how they're spreading the love around the member countries of the UN Security Council! For example, group number one includes: Chevron (US), Total (France), Petro-Canada (Canada), Sibneft (Russia), & Sinopec (China). As Henry Kissinger said, power is the ultimate aphrodisiac.
This distribution sounds, well, a little familiar: From the Timesonline, 2004: Saddam ‘bought UN allies’ with oil
The UN oil-for-food scheme was set up in 1995 to allow Iraq to sell controlled amounts of oil to raise money for humanitarian supplies. However, the leaked report reveals Saddam systematically abused the scheme, using it to buy “political influence” throughout the world.
The former Iraqi regime was in effect free to “allocate” oil to whom it wished. Dozens of private individuals were given oil at knockdown prices. They were able to nominate recognised traders to buy the cheap oil from the Iraqi state oil firm and sell it for a personal profit.
The report says oil was given to key countries: “The regime gave priority to Russia, China and France. This was because they were permanent members of, and hence had the ability to influence decisions made by, the UN Security Council. The regime . . . allocated ‘private oil’ to individuals or political parties that sympathised in some way with the regime.”
The report also details how the regime benefited by arranging illegal “kickbacks” from oil sales.
From September 2000, it is said Saddam made $228m (£127m) from kickbacks deposited in accounts across the Middle East. The analysis details only the export of oil — not the import of humanitarian supplies, also alleged to have been riddled with corruption.
So here we see that same UN Security Council buy-off pattern. Interesting. So what's up?
This 2003 article, Kuwait will not Benefit form Foreign Investment in the Northern Fields Even if an Agreement with Iraq is Reached, argues that the purpose of Project Kuwait is not the additional capacity that will be generated, but rather that it is driven by "political consideration."
Kuwait may not benefit from allowing foreign investment in its upstream oil industry because it does not need the additional capacity, especially at a time when Kuwait is trimming its production along with other OPEC members to increase oil prices. Recently, Kuwait called on OPEC members to extend production cuts beyond September 2002 and lobbied successfully to prevent OPEC from increasing its quota. In a recent speech, Nader Sultan, the CEO of KPC, declared that Kuwait will invest in extra capacity only if there is a demand for it. He insisted that investment in extra capacity must be justified by the return on investment; otherwise funds will be directed toward more profitable investments. When OPEC is cutting output, there is no justification for more investment to increase capacity. This conclusion gives even more weight to the previous conclusion that "Project Kuwait" is based mostly on political considerations.
So, just what are the politics of this? Whatever the answer turns out to be, it is likely to be complex, as this 2004 article explains: Scheme to expand Kuwait's oil production likely to cause stir
One of the most heated debates is likely to be on the fate of a scheme proposed by the government to expand production from oilfields in the far north of the country, close to the Iraqi border. On the face of it, this does not seem to be high on the list of controversial subjects that have tend to raise the blood pressure of certain Kuwaiti MPs (like demands that women should be given the vote, for example). But when one points out that the scheme has been on the drawing board since 1998, it becomes clear right away that the proposals are far from straightforward.
The question now is whether the government will succeed this time, having failed thus far in separating the project - known as Project Kuwait - from the complex web of the nation's internal politics. In other words, will it be able to win the National Assembly's support for a venture which it insists is essential for the country's future and which most MPs say is either unnecessary or politically unacceptable.
The authorities are determined to push ahead regardless. An indication of their determination was the recent creation of a post on the board of the state-owned Kuwait Petroleum Corporation (KPC) dedicated to the northern oilfields scheme.
ITPBusiness.net (2005) suggests that Project Kuwait may be a way off, in effect, allowing Kuwait the use of the military capacity of the participating countries:
Some analysts, however, think it is the government astutely playing geopolitics: let foreign oil prospectors go digging along the border, and should Iraqi tanks rumble over their wells, the majors’ governments will hear their cries and run to Kuwait’s defense.
Despite the controversial nature of Project Kuwait, it seems to have survived the death of one of its key supporters, Emir Sheikh Jaber al-Ahmed al-Sabah.
Kuwait's government is trying to push through parliament the $8.5 billion Project Kuwait, involving multinationals to upgrade four major northern oilfields to help boost its output capacity.
"The country has set a long-term oil strategy which will not change. It is committed to increasing production capacity to meet the needs of the oil markets," Baghli said.
"Project Kuwait will eventually pass after parliament adds the legal touches and some regulatory restrictions on the government," he said.
Several MPs have objected to the plan in its current form, and the parliament is due to hold a special session on January 23 to discuss the long-awaited project, which has been under discussion since the early 1990s.
As of last week Kuwait's Energy Minister Shaikh Ahmad Fahd Al Sabah said top ministry executives will meet with audit bureau officials to 'reach an understanding on the issue':
Kuwaiti MPs and the government have discussed legal and financial objections to a controversial $8.5 billion oil investment in which foreign oil majors would participate.
Objections to the legal framework and financial details had been raised by the audit bureau, the state accounting watchdog, prompting MPs in December to withdraw a report on the long-stalled project preventing its debate in parliament.
The head of parliament's financial and economic affairs committee MP Ahmad Baqer, a former justice minister, said the panel asked the bureau to prepare a fresh report based on new information sent by the energy ministry.
The report will be assessed by the committee after three weeks when it would probably take a final decision on the investment which has been opposed by more than 20 MPs of the 50-member parliament.
Energy Minister Shaikh Ahmad Fahd Al Sabah, who attended the meeting, said top ministry executives will meet with audit bureau officials to 'reach an understanding on the issue.'
'We will study the bureau's comments on the project ... and could accept some of them to make the necessary changes,' Shaikh Ahmad said.
Eight and a half billion dollars, hmm? I think they'll reach an understanding.
UPDATE: Via Mountain Runner, I happened across this Knight Ridder news story: Administration backs off Bush's vow to reduce Mideast oil imports. Why would the Administration want to reduce Mideast oil imports when Kuwait is ready to cut our oil companies such a deal?!?