KUWAIT: SENIOR ADVISOR ON STATUS OF PROJECT KUWAIT

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