KUWAITI ENERGY MINISTER ON BROWNOUTS, PROJECT

C O N F I D E N T I A L KUWAIT 003936 SIPDIS NOFORN SIPDIS STATE FOR EB/ESC/IEC, NEA/ARP; DEPT OF ENERGY FOR IE E.O. 12958: DECL: 10/01/2016 TAGS: ENRG EPET KU OIL SECTOR SUBJECT: KUWAITI ENERGY MINISTER ON BROWNOUTS, PROJECT KUWAIT, ENERGY INFRASTRUCTURE SECURITY, SAUDI ARABIAN TEXACO REF: A. KUWAIT 3620 ¶B. KUWAIT 3720 Classified By: Ambassador Richard LeBaron for reasons 1.4 (b) and (d). ¶1. (C/NF) In a 2 October call on the new and somewhat embattled Energy Minister Shaykh Ali Jarrah Sabah Al-Sabah, the Ambassador asked about the Ministry's priorities, the summer power outages, gas production, and Project Kuwait (the $8.5 billion project for international oil companies to develop Kuwait's northern oil fields). Referring to current articles in the local press about complaints from Saudi Arabian Texaco (SAT) regarding Kuwaiti plans to build a new mega-refinery in the partitioned neutral zone (PNZ),the Ambassador asked Shaykh Ali to talk with SAT about the substance of its complaint (see Ref A). Finally the Ambassador offered USG assistance to help Kuwait enhance the security of its critical energy infrastructure, suggesting Kuwait consider constituting a specialized force focused specifically on protection of energy infrastructure. ¶2. (C/NF) Shaykh Ali blamed the current shortage of electrical generating capacity (which lead to unprecedented brown-outs over the summer, prompting calls for heads to roll in the Ministry of Energy) on the postponement of tenders for several major projects in recent years. He said that in some cases these delays were the result of projects that had received insufficient bids from international companies due to unattractive terms and conditions. He added that the Ministry was now exploring a broader range of potential bidders and dividing large projects into smaller components. The Minister said Kuwait currently has a maximum generating capacity of 9600 MW and peak consumption of 9700 MW. He recognized that this would be a persistent problem as it would take three to four years to bring new power plants online. Shaykh Ali said that his most pressing priority was to identify temporary solutions to avoid power disruptions in the summer of 2007. ¶3. (C/NF) The Minister said he thought the Government could reach an understanding with Parliament to approve Project Kuwait despite the objections of some MPs, many of whom regard the project as a "concession" rather than as a service agreement. He expects to open a dialogue with MPs about the Project when Parliament reconvenes at the end of October. He said Project Kuwait is "doable," is something "at the end of the day we all want," and added, "We've already lost too many opportunities." Regarding development of the new gas discovery announced in February, Shaykh Ali said a report was due in November. On physical security of energy facilities, the Minister said he was open to USG assistance and suggested the Kuwait National Guard would be the appropriate organization to provide enhanced security. The Ambassador stressed the issue was of particular importance, given not only the threat of terrorism but the possibility of accidents. -------------- Bio Note -------------- ¶4. (SBU) Shaykh Ali was appointed Minister of Energy in July 2006, replacing Shaykh Ahmed Al-Fahd, an influential but controversial ruling family member who was roundly criticized for corruption during the 2006 parliamentary elections. Shaykh Ali was first appointed to the Cabinet as Minister of Social Affairs and Labor in February 2006. He has spent most of his career in the private sector, primarily in finance, and still serves on the board of several prominent regional financial institutions, including the BMB Investment Bank and the Arab Banking Institution, both in Bahrain, and the Burgan Bank in Kuwait. Shaykh Ali is from a non-Mubarak branch of the Al-Sabah family. He was born in 1950 and received his B.A. in Political Science and Economics from Kuwait University in 1972. ******************************************** For more Embassy Kuwait reporting, see: http://www.state.sgov.gov/p/nea/kuwait/?cable s Or Visit Embassy Kuwait's Classified Website: http://www.state.sgov.gov/p/nea/kuwait/ ******************************************** LeBaron