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KUWAIT - Shaikh Nasser Al-Muhammad Al-Sabah.

The Prime Minister since January 2006, Shaikh Nasser heads the SPC. But like the Emir, Shaikh Nasser rarely gets involved in the petroleum sector, leaving these matters to the minister and the latter's executives.

Shaikh Nasser formed a new cabinet on March 25, 2007, and retained Shaikh Ali al-Jarrah as oil minister - having split the energy ministry and re-created a ministry for electricity and water. He appointed two women as ministers. Like the rest of the cabinet and executives in the petroleum sector, however, Shaikh Nasser is struggling continuously with parliament over many issues. Elected in June 2006, parliament has been an obstacle to a number of projects in the country. Shaikh Nasser has appointed the former CEO of KPC, Hani Hussein, as his chief petroleum adviser.

Shaikh Ali Al-Jarrah Al-Sabah: Energy Minister since the summer of 2006 and changed to Oil Minister since March 25, 2007, Shaikh Ali is in charge of the petroleum sector and is chairman of KPC's board of directors. He took up this position to succeed Shaikh Ahmad al-Fahd al-Ahmad al-Sabah, who had held the energy portfolio including petroleum since it was created in 2004 (see his profile in omt25KwtWhoJun20-05).

The new cabinet, formed on March 25, split of the Ministry of Oil from the Ministry of Electricity & Water and that was welcomed by the contracting community in Kuwait. That Shaikh Ali retained the vital oil portfolio defied speculation that he would swap jobs with Finance Minister Badr al-Humaidhi. The move was a tacit government approval for Shaikh Ali, who had faced criticism over the state's energy crisis, failure in the tendering process for the al-Zour refinery and the slow progress in Project Kuwait.

Shaikh Ali's job became simpler. Ever since the electricity and water and petroleum portfolios were merged into the energy ministry, critics had claimed the energy ministry has too great a workload. The state requires clarity over the planned privatisation of the KPG group's non-core activities as well as the planned production of Kuwait's first non-associated gas reserves.

The new Electricity & Water Ministry (MPW) was taken over by Muhammad Olaim, a former MP and spokesman for the conservative Islamic Constitutional Movement. His first priority has since been to resolve the energy crisis, which is likely to result in widespread blackouts this summer as demand exceeds electricity generating capacity.

The other major change in the March 25 reshuffle was the addition of municipal affairs to the Ministry of Public Works (MPW), which now is the Ministry of Public Works & Municipality, with Mussa al-Sarraf having taken up the new post, replacing Badr al-Humaidhi.

Like Shaikh Ahmad and their predecessors since the early 1990s, however, Shaikh Ali al-Jarrah's performance will be judged on Project Kuwait to develop five northern oilfields, a huge project stalled since 1994 by parliament's Economic and Finance Committee. He has recently promised that implementation of this project will begin later in 2007 (see omt23KuwtFieldsJun4-07). But Shaikh Ali is also facing bitter opponents in parliament who want him out of office.

Conceding a key demand over Project Kuwait, the Oil Ministry will allow parliament to approve each of its related contract with international oil companies (IOCs). However, a number of problems could delay the project even further. Shaikh Ali was on May 4 quoted as saying: "If parliament wants to approve each contract of the northern oilfields' [capacity expansion] projects individually and issue them as a law, it is fine with me. If this is the only way I can defend the rights of the country, I have no problem accepting this demand". Until then, the government had insisted that parliament's role be limited to evaluating the enabling legislation, arguing that it was outside parliament's remit to scrutinise every contract.

This concession does not improve the chances of Project Kuwait being implemented soon. MPs may find the contractual terms too favourable to IOCs. The time it will take to scrutinise each contract may push the project back indefinitely.

A number of nationalist MPs reject the idea of IOCs taking control of a national resource, while others argue that the use of local agents means the project is open to corruption. Several MPs and former oil officials say the peak period of production from the northern fields is not worth the effort the government has invested in Project Kuwait. They argue the project will do little to help Kuwait Oil Co. (KOC) gain experience to produce heavy crude oil as there is no guaranteed technology transfer (see omt23KuwtFieldsJun4-07).

The cost of Kuwait's whole upstream/downstream expansion programme has risen from $55 bn in early 2005 to more than $75 bn. This is due to a rapid rise in project costs worldwide since 2002. The cost of Kuwait's planned 615,000 b/d al-Zour refinery has risen from $2 bn budgeted in early 2002 to an estimate of $17.2 bn made by a foreign contractor in April 2007 (see down23KuwtRefJun4-07).

Opposition MPs on June 10 asked to question Shaikh Ali al-Jarrah over his decision to seek advice from former oil minister Shaikh Ali al-Khalifa al-Sabah who was implicated in a major embezzlement case. The move deepens a row between parliament and the government which has gone on for months. Shaikh Ali al-Jarrah was criticised after he was quoted as saying he would seek advice from Shaikh Ali al-Khalifa, his cousin, who was oil minister for many years in the 1980s.

Shaikh Ali al-Khalifa, who had presided over the biggest restructuring of the petroleum sector and the creation of KPC in the early 1980s, was investigated over the alleged embezzlement of $130m at Kuwait Oil Tanker Co. (KOTC), the maritime shipping arm of KPC. The argument has come despite calls by the Emir to give the cabinet a chance just three months after another row led to the resignation of the previous government. Musallam al-Barrak, a key member of the National Bloc opposition party, on June 10 said he and two fellow MPs had lost trust in the minister despite his public apology over the remarks.

After submitting the request with an Islamist MP and legislators of the National Bloc, Barrak said: "We are worried about the minister's continued stay in office in this important and vital sector which accounts for 95% of the state's income". He said MPs expected to question the minister on June 25. A public questioning is parliament's sharpest weapon as it could lead to a no-confidence motion. MPs often threaten to question ministers to force them to resign to avoid tough grilling reported extensively by the media. The move came as the cabinet was expected to discuss the matter later on June 10, its first meeting after Prime Minister Shaikh Nasser returned from a two-week trip to Asia.

In an interview with the al-Qabas daily in May, Shaikh Ali al-Jarrah said he had frequently asked for advice on petroleum matters from Shaikh Ali al-Khalifa. He described the former minister as his "mentor and master". Despite his subsequent apology, however, MPs said the damage had already been done and demanded his resignation.

It is unclear whether a compromise with parliament will be found. The state can ill-afford another change in the petroleum portfolio. His predecessor, Shaikh Ahmad al-Fahd, was removed in a cabinet reshuffle after less than two years, because of parliament's dissatisfaction with his performance. MEED on June 1 quoted "sources in Kuwait" as saying Shaikh Ali al-Jarrah would have no choice but to resign.

On May 14, during a special session called by MPs to debate corruption cases, liberal MP Abdullah al-Roumi told Shaikh Ali al-Jarrah: "You have to submit your resignation today because what you said has humiliated the Kuwaiti people". MP Barrak then charged that millions of dollars had been transferred about 15 years ago into bank accounts held by Shaikh Ali al-Khalifa from former KOTC chairman Abdul-Fattah al-Badr who has fled Kuwait. Another opposition MP, Adel al-Sar'awi, urged Prime Minister Shaikh Nasser take action against the minister.

MPs also criticised the minister for announcing plans to revamp the petroleum sector by removing top officials and promoting young staff. Roumi told Shaikh Ali: "Allow me to tell you, Kuwaitis have lost their confidence in you... Have you no respect for the Kuwaiti people? Is this (Ali al-Khalifa) your teacher?" Shaikh Ali al-Jarrah then told the MPs he could not see why they were so outraged, adding: "I don't know why all this sensitivity? Yes, I said he is a brother and a cousin, but I said I will not allow anyone to interfere in the affairs of the ministry".

The emir has the last say in politics but tends only to enter the fray to resolve major issues. Kuwait's rulers have dissolved parliament several times since it was set up in 1963. Shaikh Ali al-Khalifa has denied any wrongdoing and a ministers' court dropped the case against him on a technicality in 2001. Changes in senior personnel in the petroleum sector usually do not affect Kuwait's petroleum policy.
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Publication:APS Review Oil Market Trends
Date:Jun 25, 2007
Previous Article:KUWAIT - Shaikh Sabah Al-Ahmad Al-Jaber Al-Sabah.
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