- The Washington Times - Sunday, March 15, 2009

KUWAIT CITY (AP) - Kuwait is scrapping a $14 billion project to build a fourth refinery in the oil-rich country, the prime minister said in remarks published Sunday. The announcement was the second cancellation of a major oil project since December amid government corruption allegations.

Sheik Nasser Al Mohammed Al Sabah told Al-Watan newspaper that the decision, which the Cabinet will formally take Monday, was in compliance with results from an investigation by Kuwait’s financial watchdog, the Audit Bureau.

He did not elaborate, but lawmakers have accused state officials of profiteering from the project because the contracts to build it did not go through the Central Bidding Committee. The Cabinet denies the accusations.

“We in the Cabinet are committed to the report of Audit Bureau about the fourth refinery, and we will officially stop the project in the next Cabinet meeting,” he was quoted as saying.

The scrapping of the 615,000 barrels a day refinery, which included participation by Japan’s JGC and South Korea’s GS Engineering and Construction Corp., comes just months after Kuwait backed out of a $17.4 billion joint venture with U.S. giant Dow Chemical Co. in late December, just days before the petrochemical project was to be launched.

The move was a major blow for Dow, and had some analysts saying that such backtracking would severely tarnish the country’s reputation and ability to draw in big investors.

Oil analyst Kamel al-Harami said Sunday that canceling contracts will harm Kuwait’s business reputation. But he stressed that investors have to respect that unlike most other Arab Gulf neighbors, Kuwait has an active parliament.

He said the real danger was the “inability” of higher management in the country’s state-owned companies to deal with mega projects.

Parliamentary pressure was the catalyst behind the decision to scrap the Dow deal. In the months since that deal, the government has also been under renewed pressure to enact a stimulus package to help the country deal with the global financial meltdown. That bill is still with a parliamentary committee for review.

The focus of the tensions between the oil-rich country’s executive and legislative authorities is tied to lawmakers accusing the prime minister of wrongdoing and inadequacy.

Since the beginning of this month, five lawmakers have barraged Sheik Nasser with attempts to question him in parliament over possible misuse of funds, failing to run the country and demolishing a mosque.

The ruler, Sheik Sabah Al Ahmed Al Sabah, might dissolve parliament to pre-empt hearings scheduled for Tuesday. They are seen as an embarrassment to the ruling family and they could lead to a decision by parliament to declare its intent not to cooperate with Sheik Nasser’s Cabinet.

In November, the Cabinet resigned to stop an attempt by three lawmakers to question Sheik Nasser about corruption and deteriorating public services despite the country’s oil wealth. Many lawmakers said the accusations were unfair, and the emir reappointed him as prime minister. Sheik Nasser formed a new Cabinet in January with few new faces.

The scrapped refinery was to come on line 2012.

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