OIL MINISTER SAYS KUWAITI PROVEN OIL RESERVES ARE

UNCLAS SECTION 01 OF 02 KUWAIT 000778 SIPDIS SENSITIVE SIPDIS STATE FOR EB/ESC/IEC, NEA/ARP ENERGY FOR IE E.O. 12958: N/A TAGS: EPET ENRG PGOV KU SUBJECT: OIL MINISTER SAYS KUWAITI PROVEN OIL RESERVES ARE ACTUALLY 48 BILLION BARRELS REF: 06 KUWAIT 206 ¶1. (U) Kuwaiti Oil Minister Shaykh Ali Jarrah Al-Sabah told the new Kuwaiti daily Arabic-language newspaper Al-Wasat on May 12 that Kuwait's oil reserves amount to 48 billion barrels of proven reserves and 150 billion barrels of probable reserves. According to OPEC's 2005 Annual Statistical Bulletin, Kuwait's proven reserves are 101.5 billion barrels (including half of the proven reserves in the partitioned neutral zone shared equally by Kuwait and Saudi Arabia). The Minister's statement, which is somewhat buried in an article about the outlook for Kuwait's oil sector, was picked up by Agence France-Presse on May 13. As of May 15, the article seems to have generated little attention in the local and regional media. -------------- Reserves Figure a Matter of Debate -------------- ¶2. (U) The quantity of Kuwaiti oil reserves became a matter of public debate following a Petroleum Intelligence Weekly report on January 23, 2006 (Vol. XLV, No. 4) (reftel),which referred to "data circulated within Kuwait Oil Company" showing that Kuwait's remaining proven and non-proven reserves are only about 48 billion barrels total. The report went on to state that only 24 billion of the 48 are actually proven reserves. At the time, the Chairman of Kuwait Oil Company said he thought the report was inaccurate. As recently as May 1, 2007, the Oil Minister said Kuwait would not disclose the size of its oil reserves for reasons of national security. -------------- Minister Confirms 48 Billion Barrels -------------- ¶3. (SBU) Given the unexpected nature of the Minister's statement and the fact that Al-Wasat is a new paper with no established reputation (the Minister's statement appeared in Al-Wasat's first printed issue),the Ambassador asked Shaykh Ali, in a meeting on 13 May, whether he had been misquoted. The Minister confirmed that Al-Wasat had conveyed his statement accurately. He said Kuwait was not required to state these figures publicly, but admitted that "confirmed" reserves were about 48-49 billion barrels. He added that "unconfirmed reserves", including unexplored onshore and offshore reservoirs, could be as much as "100 billion, 200 billion, or even 300 billion barrels" The Minister did not use the terms "proven," "probable," or "possible" - only "confirmed" and "unconfirmed." He did not mention any concerns regarding market reaction to his statement or potential implications for Kuwait's OPEC production quota. -------------- Statement Puzzling, but Reaction Muted -------------- ¶4. (SBU) In conversations on May 14 and 15, two of Post's senior contacts in the Kuwaiti oil sector indicated a lack of awareness of the Minister's statement. Both said that they did not expect any effect on Kuwait's OPEC production quota since, in practice, OPEC quotas are now based on production capacity more than proven reserves. One said that the only likely impact would be a slight loss of prestige for Kuwait as it falls in the rankings of top global oil producers. Of two country managers for major international oil companies that Post talked to, one was unaware of the Minister's statement. The other said he had read the statement but was puzzled by it. Both said that they could not understand why Shaykh Ali would suddenly reveal this figure to the press. They both believed, however, that the impact on oil prices would probably be insignificant since, they said, market prices already account for considerable uncertainty in the proven reserves reported by national oil companies. -------------- -------------- A Separate Oil Minister Controversy Dominates the News -------------- -------------- ¶5. (SBU) Contributing to the muted impact of the Minister's statement on reserves in Kuwait is a more rousing controversy over remarks he made to the local Al-Qabas newspaper on May 12, in which he referred to his cousin, former Oil Minister Shaykh Ali Al-Khalifa Al-Sabah, as his mentor and advisor. Shaykh Ali Al-Khalifa is suspected of involvement in a KUWAIT 00000778 002 OF 002 multi-million dollar embezzlement of government funds in the 1990s in a case which is currently a hot political issue in the Parliament. Following the publication of Shaykh Ali's "mentor" remark, several opposition Parliamentarians called for his resignation and accused him of "insulting all Kuwaitis." This latest melee between the Government and the Parliament has dominated the local news throughout the week. ********************************************* * 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