Kuwait Petroleum Corporation has replaced its chief executive and reshuffled its board after a unit was last month ordered to pay Dow Chemical US$2.5bn for a cancelled project.
KPC shake-up after $2.5bn fine
Kuwait Petroleum Corporation (KPC) has replaced its chief executive and reshuffled its board after a unit was last month ordered to pay Dow Chemical US$2.5bn for a cancelled project.
Government-owned KPC yesterday appointed Nizar Mohammad Al Asani to take over from Farouk Zanki as the head of the company, according to the state news agency Kuna. In addition, two new board members have been elected, said the Al Rai newspaper.
A statement on the cabinet website said that several members of the Petrochemical Industries Company (PIC), KPC's downstream arm, have been suspended.
The reshuffle at KPC comes after an extraordinary meeting by the cabinet to discuss the "massive losses resulting from this decision", said the statement.
In 2008 PIC pulled out of the $17.4bn "K-Dow" plastics project with Dow, citing poor market conditions during the height of the global economic crisis, and after lawmakers raised objections to the deal.
The decision almost derailed Dow's $15bn acquisition of the specialist plastics maker Rohm & Haas. Short of the $9bn payment the US chemicals giant would have received from the K-Dow joint venture, it became subject to takeover speculation before it managed to complete the deal by other means.
In March 2012, the International Chamber of Commerce ruled that PIC had to pay Dow $2.16bn in compensation, a decision contested by the Kuwaiti company. Last month Dow announced the verdict had been upheld, and that additional costs and interest had pushed up the payment to $2.48bn.
The reshuffle could have the wider goal of pushing forward with a slew of projects needed to upgrade the Kuwaiti energy sector.
"The current KPC board has nothing to do with the decision on Dow," said Kamel Al Harami, an independent oil analyst based in Kuwait. "The company needed such a shake-up."
Political wrangling between government and parliament has long plagued the country's oil sector. A 615,000 barrels per day (bpd) refinery worth $14bn is delayed, as is Shell's development of the Jurassic gasfields. The deal with the international oil company has come under fire from lawmakers, slowing the pace of progress.
Kuwait has set the ambitious target of boosting oil production capacity from the current 3.2 million bpd to 4 million bpd by 2020, and gas production from 1.5 billion cubic feet per day (cf/d) to 4.3 billion cf/d by 2030. The country is predicted to need outside help to achieve its targets.