COMMENTS FROM ENERGY MINISTER AND UNDERSECRETARY

C O N F I D E N T I A L SECTION 01 OF 03 KUWAIT 004648 SIPDIS SIPDIS LONDON FOR TSOU DEPARTMENT OF ENERGY FOR IE EB/ESC/IEC FOR GALLOGLY, DOWDY E.O. 12958: DECL: 11/01/2010 TAGS: ENRG EPET ECON KU OIL SECTOR SUBJECT: COMMENTS FROM ENERGY MINISTER AND UNDERSECRETARY ON KUWAIT PROJECT, GAS SUPPLIES, NEW TECHNOLOGIES, ENERGY DIALOGUE AND COOPERATION WITH IRAQ REF: A. KUWAIT 3173 ¶B. KUWAIT 0943 Classified By: Ambassador Richard LeBaron for reason 1.4 (b) ¶1. (C) Summary: During an October 30 meeting with the Ambassador, Energy Minister Shaykh Ahmad Fahd Al-Ahmad Al-Sabah told the Ambassador that prospects for a vote on the northern oilfields project were good for November or December and that he expected it to pass, echoing what Ministry of Energy Undersecretary Issa Al-Own told us the day before. Shaykh Ahmad also said that the prospects for an American firm's involvement in the upcoming Al-Zour power plant project were good. ¶2. (C) U/S Al-Own said that the GOK would be spending $100 million to support research into new energy technologies, including the use of hydrocarbons in fuel cells. He noted his pleasure with his recent visit to the U.S. and his meetings with Department of Energy counterparts, as well as his meeting with a possible private think tank partner for the new GCC Strategic Studies Center. Al-Own mentioned that the last OPEC meeting of 2005 will be in Kuwait in December and will coincide with a OAPEC meeting at the same time. The supply of gas for Kuwait's power and petrochemical plants still remained a concern for Al-Own, but he said that he saw progress on a small but promising cooperation agreement to import gas from Iraq, as well as Kuwait's ability to begin seismic surveying activity in the offshore Al-Durra gas field. Neither Qatar nor Iran appeared to be promising sources of gas in the near-term, according to Al-Own. Finally, he said that a joint committee with Iraq had been proposed to discuss unitization of the shared fields along the northern border, but that the Iraqis had yet to submit names for the committee. End Summary. Northern Oilfields Vote Likely Soon -------------- ¶3. (SBU) During an October 30 meeting with the Ambassador, Energy Minister Shaykh Ahmad Fahd Al-Ahmad Al-Sabah told the Ambassador that prospects for a National Assembly vote on the northern oilfields project were good for November or December and that he expected it to pass. He said that he had "more than enough votes" for the project, and that he hoped to bring it to the newly elected parliamentary Economic and Financial Affairs Committee after Ramadan ended. He said that he would ask the Cabinet to request a special National Assembly session in November and that he wanted to have the bill voted on by January. U/S Al-Own told us the same thing on October 29, also saying that he expected the vote to pass easily. ¶4. (SBU) The Minister said that there were seven consortium approved for bidding on the estimated $2 billion engineering, procurement and construction (EPC) contract for the 2,500 MW Al-Zour North power plant, and that six of the seven included an American company. He said that the prospects for an American firm's involvement in the EPC contract were "very good." Ministry of Energy Interested In New Energy Technologies -------------- -------------- ¶5. (SBU) During an October 29 meeting with the Ambassador, Ministry of Energy Undersecretary Issa Al-Own said that the GOK would be spending $100 million to support research into new energy technologies and new energy supplies. He spoke highly of a conference he recently attended in Houston and a roundtable he attended in Washington, saying that the events brought interesting new energy technologies to his attention. He was particularly impressed with research into the use of hydrocarbons in fuel cells, as opposed to hydrogen. He said that this would allow the gas-based delivery system, of gas stations and pipelines, to remain useful in the future. Al-Own also spoke with interest of a technology that allows for the capture and recycling of carbon dioxide emissions. These two technologies, he explained, would be of interest to a country as dependent on hydrocarbons as Kuwait. Expanding the Energy Dialogue -------------- ¶6. (SBU) Besides the conferences, Al-Own also met with Department of Energy counterparts in Washington. He said KUWAIT 00004648 002 OF 003 that he had good talks with DoE Deputy Secretary Clay Sell and Senior International Policy Advisor Molly Williamson, and that he had proposed to hold an annual dialogue in order to further energy cooperation. Al-Own said that the next step would be for him to send a letter to DoE DepSec Sell suggesting the venue and topic for the first meeting, with the location of the meeting alternating each year between Kuwait and the U.S. The main purpose of the meetings would be to "exchange information about investments, OPEC, and other energy issues." Al-Own suggested that the meetings start at the Undersecretary level and then devolve to the technical experts as time went on. He emphasized that the GOK objective for the dialogue was practical results, not political symbolism. GCC Strategic Studies Center Moves Forward -------------- ¶7. (SBU) Al-Own said that more progress had been made on the establishment of the "GCC Center for Strategic Studies," a GCC-wide energy think tank that he earlier described to Embassy officers (Ref A.) He said that agreement had been reached for the Center to be hosted in Kuwait and that, with the GCC energy ministers' approval in December, the organizational framework could be created in January 2006. He said that the Center would contain "all GCC oil data" and would be useful as a one-stop resource for Western researchers. The people establishing the Center wish to bring in the expertise of an outside consultant to organize the center and have narrowed their choice to the U.S.-based Center for Strategic and International Studies (CSIS) and "two or three European organizations," according to Al-Own. He appeared to favor CSIS, saying he had a "very good meeting" with CSIS Executive Vice President Robin Niblett during his trip. Gas Supplies Still A Concern -------------- ¶8. (C) The supply of gas for Kuwait's power and petrochemical plants still remains a concern for Al-Own, but he said that he saw progress on a small but promising cooperation agreement to import gas from Iraq (Ref B). The agreement would bring 35 million cubic feet of gas per day from Iraq to Kuwait to begin with, and then would be expanded to 200 million cubic feet per day. Al-Own said that he hoped that Iraq was "over the political turbulence" and that more stability would move things forward on this gas deal. He said that KPC's external exploration subsidiary, KUFPEC, was investing in the "Siba" gas field, located southeast of Basrah along the Iraq-Iran border, and was hoping to bring additional supplies online from that field. ¶9. (C) Referring to the long-stalled gas pipeline project between Qatar and Kuwait, Al-Own said that he was "not giving up on the Qataris," but that "the way is not easy," because of Saudi objections to the deal. He said that Kuwait and Qatar would make another try to resolve this dispute at the upcoming GCC meetings. Without going into details, he said that the deal for Kuwait to import gas via pipeline from Iran was "getting a little complex." He added that Kuwait was now ready to do a seismic survey of the disputed offshore Al-Durra field, but just on the area not under dispute with Iran. Al-Own said that this field might be able to produce as much as 400-600 million cubic feet of gas per day, and that it would be shared with Saudi Arabia since the field lies in the offshore portion of the divided zone. Energy Cooperation with Iraq -------------- ¶10. (C) Al-Own offered his opinion that "Iraq would need ten years to produce (oil) at a higher capacity than the present," and that this would only occur with "a proper program of development and rehabilitation" of the oil sector. He said that a joint committee with Iraq had been proposed to discuss unitization of the shared fields along the northern border, but that the Iraqis had yet to submit names for the committee. He did not foresee these discussions having any effect on the proposal to bring in foreign companies to help develop the northern oilfields. ******************************************** Visit Embassy Kuwait's Classified Website: http://www.state.sgov.gov/p/nea/kuwait/ KUWAIT 00004648 003 OF 003 ******************************************** LEBARON