This record is a partial extract of the original cable. The full text of the original cable is not available.

C O N F I D E N T I A L SECTION 01 OF 02 KUWAIT 005266 
 
SIPDIS 
 
SIPDIS 
 
LONDON FOR TSOU 
DEPARTMENT OF ENERGY FOR IE 
EB/ESC/IEC FOR GALLOGLY, DOWDY 
 
E.O. 12958: DECL: 12/28/2015 
TAGS: ENRG EPET ECON BEXP KU OIL SECTOR
SUBJECT: KUWAIT PROJECT STALLED IN PARLIAMENT...AGAIN, KP 
OFFICIAL REMAINS HOPEFUL 
 
Classified By: Ambassador Richard LeBaron for reason 1.4 (b) 
 
¶1.  (C) Summary: After reviewing a critical State Audit 
Bureau report on the enabling law for the participation of 
foreign companies in the development of Kuwait's northern 
oilfields (Kuwait Project), the National Assembly's Economic 
and Financial Affairs Committee withdrew its previously 
submitted report favoring the project.  The Assembly vote on 
the law, originally scheduled for January 16 and pushed back 
to the 23rd, is now on hold.  Kuwait Project Executive 
Assistant Managing Director Hashem Al-Rifaei remains hopeful 
and told Econ Officer on December 26 that he still expects 
the law to come up for a vote soon.  End Summary. 
 
¶2.  (SBU) In mid-December, Kuwait's State Audit Bureau issued 
a report on the proposed law to allow foreign oil companies 
to develop and operate Kuwait's northern oilfields (Kuwait 
Project).  The Bureau criticized a favorable report issued 
earlier by the Economic and Financial Affairs Committee of 
the previous Parliament.  The Bureau's report found fault 
with the National Assembly Committee's report for "not 
considering the main contracting objectives" and for 
exceeding the limits of a contracting agreement.  The Audit 
Bureau also suggested that any contract to be signed with the 
IOCs involved in the Kuwait Project be subjected to the 
Bureau's supervision.  On December 20, 20 MPs issued a 
statement insisting that each part of the Kuwait Project 
contract between the GOK and IOCs be ratified by Parliament. 
Finally, on December 24, the Economic and Financial Affairs 
Committee decided to withdraw its report for further 
consideration.  A vote on the law, originally scheduled for 
January 16 and later pushed back to January 23, has been put 
on hold indefinitely. 
 
¶3.  (C) Kuwait Project EAMD Hashem Al-Rifaei told Econ 
Officer on December 26 that, despite the Committee's December 
24 decision to withdraw its report on the project, he still 
expected the enabling law for the project to come up for 
discussion and a vote in front of the full Assembly sometime 
in January.  He said that he had just spoken with someone 
from the Council of Minister's office and that the Council 
fully supported the project and wanted the vote to take 
place.  He described the recent moves as "just political 
tactics," but he was clearly frustrated by the repeated 
delays. 
 
¶4.  (C) By all accounts, the NA Committee decided to withdraw 
its report based on the recent publication of an Audit Bureau 
report finding a number of problems with the 
constitutionality of the enabling law and the proposed 
contract with the IOCs.  Al-Rifaei said that the Audit Bureau 
report was based on the Bureau's review of a May 2005 draft 
contract.  He said that this contract was no longer valid and 
that the Audit Bureau "could no longer be considered an 
impartial government body." 
 
¶5.  (C) He said that he expected the measure would still be 
discussed by the National Assembly on January 23, and that it 
could possibly come up for a vote the same day.  (Note: Our 
Political Section colleagues are not aware of a session on 
January 23 and think it may actually come up on the 30th, if 
at all.)  Al-Rifaei said that, despite all of the political 
maneuvering, he still believed that there are 33 votes in 
favor of the project, which gives it enough to pass.  The one 
obstacle they do face, he said, is that "time is against us" 
and that other pressing matters could move the Kuwait Project 
vote to the back-burner.  "The political situation...," he 
sighed, "...it's murky." 
 
¶6.  (C) He explained that the new Committee was not as 
supportive of the project as the old Committee, and needed a 
lot of attention and "tutoring" in order to help them 
understand the project.  He said that he had spent four hours 
the previous evening at the home of an unidentified National 
Assembly member and member of the Economic and Financial 
Affairs Committee, explaining "the ABCs of oil," as he put 
it.  He said that this was the case not only with a few of 
the new members of the Committee but with many members of the 
NA, that they just did not understand anything about oil or 
the oil business. 
 
¶7.  (C) Al-Rifaei said that he was hoping to see an immediate 
public response from the Ministry of Energy to the Audit 
Bureau's report, but that it had to wait because the Minister 
has been in China and Russia over the past few days.  He said 
that he was at that moment preparing a fax to send to the 
Minister's plane so that Minister of Energy Shaykh Ahmed Fahd 
Al-Ahmed Al-Sabah could have a press conference immediately 
upon his return to Kuwait, in order to refute the Audit 
Bureau report and to support the project and urge for a vote. 
 He said that he was a bit disappointed that Kuwait Petroleum 
Corporation CEO Hani Hussain has not come out strongly for 
the project in public and that he has had numerous 
opportunities to do so. 
 
¶8.  (C) Al-Rifaei said that, if the enabling law did get 
voted on and passed, he expected it to be about 3 months 
later that KOC would be able to present a bid package to the 
IOCs.  He said that this would actually consist of about two 
months of internal GOK processes, and one month for his 
division to update the project data and prepare the bid 
package.  He then expected the IOCs to be given 2-3 months to 
respond, and that his group would take about 2-3 months to 
review the responses.  He said that the IOCs would be 
expected to submit their response in two separate packages: 
one envelope would contain their technical qualifications; 
and the second would contain their bid amount.  The technical 
qualifications would be analyzed by his group and whoever was 
qualified would then have their bid envelope opened up, 
preferably on Kuwaiti national television.  He said that his 
group had run this idea past Transparency International and 
that the organization told them that they could not think of 
a better way to do it to avoid any charges of corruption in 
the bid process. 
 
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Visit Embassy Kuwait's Classified Website: 
http://www.state.sgov.gov/p/nea/kuwait/ 
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LeBaron