KUWAIT PROJECT (NORTHERN OILFIELDS) STATUS:

C O N F I D E N T I A L KUWAIT 000936 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: 03/07/2015 TAGS: EPET ENRG BEXP KU OIL SECTOR SUBJECT: KUWAIT PROJECT (NORTHERN OILFIELDS) STATUS: NATIONAL ASSEMBLY DELIBERATES, COMPANIES IN WAITING GAME REF: A. KUWAIT 0650 ¶B. KUWAIT 0568 ¶C. 2004 KUWAIT 4556 Classified By: Ambassador Richard LeBaron for reason 1.4 (d) ¶1. (U) March 2005 newspaper reports and conversations with post interlocutors show continued progress by the National Assembly's Financial and Economic Affairs Committee on studying the enabling law allowing for outside investment in the petroleum sector. If passed, the law would allow for the Kuwait Petroleum Company (KPC) to sign an operator service agreement with one of the consortia bidding on the development of the northern oilfields, otherwise known as the Kuwait Project (reftels). U.S. companies, specifically ChevronTexaco and ExxonMobil, lead two of the consortia, while Occidental Petroleum is an investing partner in a third led by BP. Representatives of the companies are mostly in a "wait-and-see" holding pattern as pieces of information dribble out from the National Assembly's deliberations. ¶2. (C) Ambassador spoke to ChevronTexaco General Manager Hani Iskander on March 5. Iskander was encouraged by statements by National Assembly Chairman of the Financial and Economics Affairs Committee Abdulwaheb Al-Haroun in favor of the project. Iskander's main concern at this point is the requirement that bids be submitted as a single figure with no technical back-up. He explained that this will encourage the successful bidder to maximize quick rather than sensible exploitation of the reservoir. ¶3. (C) ExxonMobil Kuwait President John Hoholick described himself as being in a "holding pattern," watching things develop in the press. He did not express any specific concerns and actually sounded a bit optimistic about movement of the enabling law through the National Assembly. He said he had it on good sources that the Minister of Energy had "vowed to get the bill passed during this session of Parliament." He said that Kuwait Project Managing Director Ahmed Al-Arbeed is still actively "educating the public" and he did not think that there was much that any of the companies or the Embassy could do at this point other than watch and wait. He said that he received a letter from the Minister of Energy saying that the Minister would like to meet with the ExxonMobil Chairman sometime during April to "discuss matters of mutual concern to our two countries." He is not quite sure what to make of this and is going to check with KPC Chairman Hani Hussein and other IOC execs to see if others have received the same letter. ¶4. (C) David Scott, Occidental Petroleum VP, told EconOfficer March 7 that he had heard that the "terms had become a bit leaner" and that it would make it a "harder sell" to his superiors for OXY to be involved. He thanked Post for continued support for, and advocacy on behalf of, all of the American companies bidding on the project. He asked that Post continue to urge the Ministry of Energy to move the project forward and asked that Post press the Ministry to release a timeline on the bidding process, so that OXY and the other companies could plan and shift resources as needed. He also asked that Post continue to press for transparency throughout the bidding process. ******************************************** Visit Embassy Kuwait's Classified Website: http://www.state.sgov.gov/p/nea/kuwait/ ******************************************** LEBARON