KUWAIT-SAUDI FRICTION OVER SAUDI ARABIAN TEXACO

C O N F I D E N T I A L KUWAIT 003620 SIPDIS SIPDIS ENERGY FOR IE, WILLIAMSON; EB/ESC/IEC FOR GALLOGLY, DOWDY; NEA/ARP FOR JACKSON E.O. 12958: DECL: 09/05/2016 TAGS: ENRG EPET ECON BEXP KU SUBJECT: KUWAIT-SAUDI FRICTION OVER SAUDI ARABIAN TEXACO AND REFINERY CONSTRUCTION IN THE PARTITIONED NEUTRAL ZONE REF: A. RIYADH 5605 ¶B. 05 KUWAIT 5252 Classified By: Ambassador Richard LeBaron for reasons 1.4 (b) and (d) ¶1. (C) In a 6 September meeting with CDA, Saudi Arabian Texaco (SAT) President Ahmed Al-Omer expressed concern that despite the KSA's formal objection, the GOK appeared to be proceeding with plans to build its new mega-refinery right on the doorstep of SAT's compound in the Mina Al-Zour area within the Partitioned Neutral Zone (PNZ) between Kuwait and Saudi Arabia. (Note: For background on the PNZ, the SAT concession, and GOK refinery plans, see ref B. End Note.) Al-Omer told the CDA that the Saudi Foreign Minister had sent a letter (reported in ref A) to the GOK stating the KSA objection to the proposed site of the refinery. The KSA argues that the proposed location would negatively impact SAT operations and violate the original concession agreement which granted SAT the right to veto any property development plans in the PNZ. According to Al-Omer, the KSA has also informed the GOK that the KSA and Chevron have begun discussions regarding extension of the SAT concession which is due to expire in February 2009. (Note: The GOK's stance up until now has been since the KSA has not stated that it will renew SAT's concession, SAT does not need the land on which the GOK plans to build the new refinery. End note.) In response to Al-Omer's presentation, CDA said the Embassy would raise the issue with the GOK to see whether there was any evolution in the GOK's thinking on the refinery. ¶2. (C) During a visit of Econoffs to the SAT compound following the meeting with the CDA, Al-Omer received a phone call from the Saudi Petroleum Ministry informing him that the GOK had delivered a formal response to the KSA letter. Al-Omer relayed the GOK's reply that its refinery construction would have negligible impact on SAT since it would only require the demolition of a few chalets owned by SAT executives. According to Al-Omer, no such chalets exist, and the scope of the new refinery would directly impact SAT expansion plans related to a reservoir steam injection project to enhance production in the PNZ's maturing fields. Furthermore, a loading terminal associated with the new refinery would affect SAT's marine operations and the close proximity of the refinery to SAT housing would directly impact the living conditions of SAT employees. Al-Omer requested USG advocacy to support SAT's position and stated that he expected the KSA to push harder to persuade the GOK to select an alternative site for its refinery. ********************************************* * For more reporting from Embassy Kuwait, visit: http://www.state.sgov.gov/p/nea/kuwait/?cable s Visit Kuwait's Classified Website: http://www.state.sgov.gov/p/nea/kuwait/ ********************************************* * LeBaron