NATIONAL ASSEMBLY MEMBERS POSITIVE ON NORTHERN

C O N F I D E N T I A L SECTION 01 OF 02 KUWAIT 000650 SIPDIS STATE PLEASE PASS DEPARTMENT OF ENERGY FOR IE STATE FOR NEA/ARPI EB/CBA FOR J.F. MERMOUD, W. BEHRENS EB/ESC/IEC FOR GALLOGLY, DOWDY USDOC FOR 4520/ITA/MAC/AME, 3131/USFCS/OIO E.O. 12958: DECL: 02/15/2005 TAGS: EPET BEXP ECON KU SUBJECT: NATIONAL ASSEMBLY MEMBERS POSITIVE ON NORTHERN OILFIELDS PROJECT APPROVAL REF: A. KUWAIT 0326 ¶B. 2004 KUWAIT 4556 Classified By: Ambassador Richard LeBaron for reason 1.4 (d) ¶1. (C) Summary and Comment: During January and February, Ambassador met with five prominent MPs and discussed the Kuwait Project to develop the northern oilfields and the associated enabling law, which will come before a vote in the National Assembly soon. The MPs were generally supportive of the GOK's efforts to pass an enabling law allowing for foreign investment in Kuwait's oil industry, but wanted to make sure that they received all the details of the Kuwait Project and wanted to ensure that the National Assembly had its say. It is post's understanding that the Kuwait Project enabling law could come up for a vote as early as March or April. Comment: We are in continuous contact with the U.S. companies interested in this major project. They are ChevronTexaco, ExxonMobil (both as consortium leaders) and Occidental Petroleum (as a member of BP's consortium.) Their use or non-use of agents has been based on their own business decisions and practices. Their main concern is that the GOK will make the margins so thin on the project that they will not be in a position to respond to the RFP, expected in April. End Summary and Comment. Kuwait Project: MPs Supportive, with Some Reservations -------------- -------------- ¶2. (U) In meetings with leading MPs throughout January and February, the Ambassador heard varying levels of support for the enabling law allowing for foreign investment in Kuwait's oil sector. The Ambassador emphasized the level of expertise and quality that U.S. companies would bring to the Kuwait Project and asked for clarification on various points, including the use of agents. ¶3. (C) Liberal MP Abdulwahab Al-Haroun told the Ambassador that the documents had been given to the Economic and Finance Committee at the end of December and that the committee would study the documents for about two months and then present its findings to the full National Assembly (Ref B). Independent MP Abdullah Al-Roumi, a moderate who is not part of this committee, said that he has not yet seen any of the documents but that he is not against it. He said that his problem in the past, when the National Assembly earlier rejected the enabling law, was a "technical one," and that "if the technical people say we need this, I support it." He told the Ambassador that the use of agents was canceled in the enabling law, as per the request from the GOK, in order to remove the possibility of people "taking advantage of the money situation." (Note: In fact, the current proposal makes use of a Kuwaiti agent optional.) Moderate Shi'a Islamist MP Yousef Al-Zalzalah, who is on the committee with Al-Haroun, said that he "knows the issue well," and that he thinks the current package is "excellent." He said that he recognized Kuwait's need to bring in outside technical expertise but on the condition that Kuwaiti employees get trained in the more difficult technical skills. He said that pressure from the MPs had brought a contract that the MPs could agree on, but could not say whether the vote on the enabling law would be close or overwhelming. He said that the GOK was "expediting the issue," echoing what post has heard from contacts throughout the oil industry and elsewhere. While Sunni Islamist MP Nasser Al-Sane raised complaints about transparency and the way the GOK had previously presented the Kuwait Project to the MPs, he conceded that the Kuwait Project would likely be approved, albeit with "a lot of noise." (Ref A) (Comment: Al-Sane and his Islamic Constitutional Movement (ICM) bloc may be more inclined to support the law and Kuwait Project now that Ahmed Al-Arbeed, himself an ICM member and an Islamist, has been named Managing Director of the Kuwait Project division of KPC and is actively lobbying for approval of the project.) ¶4. (C) GOK oppositionist and long-time opponent of the project MP Ahmed Al-Saadoun staked out a position that was clearly against the enabling law and the Kuwait Project, but he seemed to be most concerned about technical details concerning the production levels in the northern oilfields. He said that since the main argument for the project in the past had been to secure Kuwait's northern border from further aggression from Saddam Hussein, the argument that it was now based on technical issues must be convincing. While the GOK has claimed that the current production of the concerned fields is 450,000 bpd and that investment and development by international oil companies (IOCs) would raise the production to 900,000 bpd, Al-Saadoun said that he believed production at these fields has already reached 650,000 bpd and could reach 750,000 bpd, without any additional outside investment. Al-Saadoun wants the GOK to submit the actual Kuwait Project contract to the MPs as a law, rather than just an enabling law allowing for KPC to sign such contracts. He said that he did not think the GOK was being completely transparent about the project and he did not seem convinced by the recent presentations made to MPs by KPC and the Minister of Energy. He said that if the project did proceed, it should do so without agents, because agents bring "abnormal pressures rather than an exchange of interests" and the "pressures from agents of companies raise questions about the intentions of a company." ******************************************** Visit Embassy Kuwait's Classified Website: http://www.state.sgov.gov/p/nea/kuwait/ ******************************************** LEBARON