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IdentifierCreatedClassificationOrigin
06KUWAIT4147 2006-10-17 12:11:00 CONFIDENTIAL//NOFORN Embassy Kuwait
Cable title:  

REFINERY DISPUTE WITH SAUDI ARABIAN TEXACO

Tags:   EPET ENRG EINV PREL KU SA OIL SECTOR 
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VZCZCXRO1536
OO RUEHDE
DE RUEHKU #4147 2901211
ZNY CCCCC ZZH
O 171211Z OCT 06
FM AMEMBASSY KUWAIT
TO RUEHC/SECSTATE WASHDC IMMEDIATE 7218
INFO RUEHRH/AMEMBASSY RIYADH IMMEDIATE 2285
RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE
RHEBAAA/DEPT OF ENERGY WASHDC
					  C O N F I D E N T I A L KUWAIT 004147 

SIPDIS

NOFORN
SIPDIS

STATE FOR P, EB/ESC/IEC, NEA/ARP; DOE FOR IE

E.O. 12958: DECL: 10/17/2016
TAGS: EPET ENRG EINV PREL KU SA OIL SECTOR
SUBJECT: REFINERY DISPUTE WITH SAUDI ARABIAN TEXACO
(CHEVRON): INPUT FOR P MEETING

REF: A. RIYADH 008253

B. KUWAIT 3936

C. KUWAIT 3751

D. KUWAIT 3720

Classified By: CDA Matt Tueller for reasons 1.4 (b) and (d).



1. (C/NF) Post concurs with Embassy Riyadh's points in
ref. A, but would add that further delay of Kuwaiti plans to
build a new 615,000 bpd refinery could adversely affect U.S.
companies considering participation in the project including
Fluor, Parsons, GE, and Bechtel. In addition, the start of
the project has already been delayed several times, and
Kuwait needs to bring the refinery online in order to be able
to decommission its aging and underperforming refinery at
Shuaiba. Post also notes that selecting a new site for the
refinery could be difficult for the GOK due to the density of
both existing and planned population centers and
infrastructure along Kuwait's coast. The GOK claims that
there is no other viable site for construction of a refinery
of this scale. Finally, in the context of ongoing power and
water shortages (ref. D), Kuwait plans to use the fuel
produced in the refinery to supply new and existing power
plants, thereby increasing electrical capacity to meet
growing demand.



2. (C/NF) The Ambassador has raised the issue of Saudi
Arabian Texaco's (SAT) complaint regarding the refinery site
with both the Minister of Energy (ref. B) and the Chief
Executive of Kuwait Petroleum Company (KPC) (ref. C). While
noting that SAT is a subsidiary of Chevron, an American
company, the Ambassador has repeatedly asked the GOK to
engage directly with SAT to try to resolve the issue. The
KPC chief told the Ambassador that the GOK expects the SAG to
renew or extend the SAT concession, but said that the
refinery should have no measurable impact on SAT's
operations. SAT officials of course dispute this latter
point vigorously.



3. (C/NF) Post has been closely engaged with SAT on this
issue and has visited the proposed site for the refinery. It
is Post's assessment that although refinery construction may
or may not directly impact SAT's current operations, the
refinery would clearly impact SAT's housing and recreational
areas and adversely affect the living conditions of SAT
employees. Contradicting the assessment of Chevron executive
Rasheed Al Rasheed (ref. A), SAT's chairman and the chairman
of Kuwait Gulf Oil Company (KGOC), SAT's partner for joint
operations in the partitioned neutral zone, have both told
Post that SAT's steam injection pilot project has been a
notable success. If the SAG indicates that it will renew or
extend the SAT concession, KGOC and SAT both expect the steam
injection project to ramp up significantly. Construction of
the Kuwaiti refinery on the proposed site could clearly
impact SAT's expansion of this important project, which has
the potential to significantly increase the recovery of heavy
crude from the oil fields in the neutral zone.
********************************************* *
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/
********************************************* *
Tueller