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BP, Chevron Managers Leave Kuwait as Projects Delayed

Bloomberg.com

By Ayesha Daya

April 28 (Bloomberg) — Chevron Corp. and BP Plc are withdrawing top executives from Kuwait after more than a decade of negotiations failed to gain access to the world’s fourth- largest crude oil reserves.

Hani Iskander, the Chevron Kuwait president, may leave next month after failing to reach an accord to boost output, according to two Kuwait-based officials who declined to be identified because the decision isn’t final. BP’s vice president for Middle East exploration and production, Tim Marchant, is also departing as talks to invest in the country slow.

Kuwait risks missing its target of almost doubling oil production by 2020 from 2.1 million barrels a day now as parliamentary opposition blocks the country’s biggest expansion efforts. The delay hobbles international oil companies that already face restrictions tapping reserves in Saudi Arabia, Iran and Iraq, the three largest OPEC producers.

“Kuwait won’t reach its 4 million barrel-a-day target without the help of established oil companies, who deal with challenging oil fields and can impose an efficient investment program,” said Raja Kiwan, a Dubai-based analyst at energy consultant PFC Energy. “The bulk of its production comes from fairly mature fields, so incremental output will come from difficult reserves in the northern fields and heavy oil.”

Presence Reduced

BP’s new general manager in Kuwait will be Nouf al- Abdulrazzaq, the company’s former communications and external affairs manager in the country. “The office has downsized but our commitment to Kuwait is still there,” she said. BP engineers moved out in 2008 after a contract to help the state oil company with management strategies ended. The Kuwait Investment Authority, with a 1.8 percent stake, is the third- largest shareholder in London-based BP, according to data compiled by Bloomberg.

Chevron, the second-largest U.S. oil company, is “going through a normal demobilization of staff” after a technical agreement with Kuwait Oil Co. expired in August, spokeswoman Margaret Cooper said by e-mail. San Ramon, California-based Chevron continues to produce oil in the so-called Neutral Zone between Kuwait and Saudi Arabia.

Kuwait may revise oil targets at the end of the year to focus on “aggressively” exploring for natural gas, Sami al- Rushaid, chairman of Kuwait Oil, the production arm of state-run Kuwait Petroleum Corp., said in a March 31 interview.

Direction Shifted

“Our new strategic direction has shifted, so now we’re talking 2030, we’re looking beyond 2020,” he said.

Mahmoud al-Rahman, a former chairman of KPC’s international exploration unit, Kuwait Foreign Petroleum Exploration Co., said the nation should develop the fields without foreign oil firms.

“We’ve been producing our own oil for 60 years, and we’ve been able to develop oil abroad in difficult areas, so it leads us to think there must be some financial reward involved for oil officials to insist on giving contracts to foreign companies,” he said.

Opposition to foreign participation in oil projects is the result of a minority of politicians rather than government policy, said Abd al-Wahab al-Harun, a former leader of Kuwait parliament’s finance and economy committee.

Kuwait nationalized its oil industry in 1975, restricting international companies to offering advice to KPC. A plan known as Project Kuwait to develop northern fields with foreign companies has been on hold for a decade because of political opposition.

The country began new negotiations about three years ago with Chevron, BP,Exxon Mobil Corp. and Royal Dutch Shell Plc, to obtain foreign technology while keeping control over its oil and gas reserves. KPC has delayed these so-called enhanced technical service agreements for another six months, according to Kuwait-based international oil company officials. They don’t expect an agreement in 2009.

Oil Demand Falls

While the slowing world economy has reduced oil consumption, the Paris-based International Energy Agency expects demand to rise by about 1 percent annually over the next four years. Reduced investment now may cause a “supply crunch” when the economy recovers, the IEA said. The oil industry is reviewing staffing and budgets after crude tumbled to about $50 a barrel from a record $147.27 in July. Oil traded at $49.29 a barrel at 12:23 p.m. in Singapore.

Exxon Mobil has been negotiating a heavy oil project since 2007. The scale of the venture was reduced to a potential 450,000 barrels a day by 2020, instead of 750,000 barrels, Kuwait Oil said last month.

“We’re still talking, we’re still interested,” Richard Vierbuchen, Exxon’s vice president for the Caspian and Middle East, said in an interview in Kuwait on March 31.

Dow Chemical Contract

Shell has no comment on discussions to develop deep natural gas in Kuwait,Malcolm Brinded, the company’s executive director for exploration and production, said in a March 30 interview.

International companies are also discouraged by Kuwait’s cancellation of two multibillion-dollar contracts, overturned after lawmakers denounced them as overpriced.

Kuwait scrapped a deal to buy 50 percent of Dow Chemical Co.’s plastics unit in December and canceled contracts last month to build a $15 billion refinery.

“After the Dow deal falling apart and the stalled refinery project, people will think twice before wanting to invest,” said Alex Munton, an analyst at Edinburgh-based Wood Mackenzie Consultants Ltd.

Kuwait’s emir dissolved parliament on March 18, the second time in a year and the sixth time since the country introduced parliamentary democracy in 1962. The country’s fifth permanent oil minister in three years, Sheikh Ahmed al-Abdullah al-Sabah, was appointed Feb. 9.

“These mega-projects are the symptom of underlying political issues between the royal family and local opposition groups about how the country is governed,” Munton said.

To contact the reporter on this story: Ayesha Daya in Dubai[email protected]

Last Updated: April 28, 2009 00:59 EDT 

Bloomberg Article

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