Currency News

Kuwait Awaits Iraq Govt Moves to Pen Big Gas Deal

by  Spencer Swartz, Dow Jones Newswires
FWN Select 6/5/2006

LONDON, Jun 04, 2006 (Dow Jones Commodities News Select via Comtex)

Kuwait is set to sign a long-awaited natural gas contract valued around $823 million with Iraq but is awaiting that government's move to finalize the deal, Kuwait's official news agency reported Sunday.

Kuwait Undersecretary of Energy Eisa Al-Oun told the agency the technical and trade details of the proposed gas deal had been agreed and the delay in concluding the deal was due to the formation of Iraq's government.

Iraq's 275-member parliament approved the country's new oil minister a few weeks ago but hasn't signed-off on the candidates for the ministerial heads of defense, interior, and national security.

Al-Oun said the first stage of the project, valued at $27.7 million, entailed Kuwait importing up to 38 million cubic feet. No timeline was given on how long the first stage runs and whether the stated gas volumes were on a daily basis.

The second stage is valued at $795.3 million and involves the Arab Gulf nation importing 200 million cubic feet of Iraqi gas, the agency said. No timeline was given on the duration of the second stage.

Kuwait could also provide Iraq with more gasoline and diesel to help ease its neighbor's constant petrol supply problems, Oun said.

"We have no objection to supplying more within our production and export capacity," Oun was quoted as saying, noting that Kuwait was already supplying Iraq with about 3 million liters (795,000 gallons) per day of petrol and diesel.

Iraq's oil production and exports have been hampered by years of under-investment, bad weather, electricity cuts and technical problems at oil-fields.

Oun said Kuwait had yet to determine a location in the U.S. for a proposed refinery.

Kuwait announced its first major natural gas discovery in March but is looking to import gas from neighboring countries to fuel power plants for electricity.

Kuwait has said it plans to use much of its domestically found gas reserves on higher-value petrochemical products.

Kuwait said it discovered upwards of 35 trillion cubic feet, although some energy analysts have cautioned that more well tests need to be conducted to confirm the size of the gas reservoir and how much is economically recoverable.

Kuwaiti plans to import gas from neighboring Qatar have so far been scuppered because of Saudi Arabia's refusal to approve a pipeline that would need to pass from Qatar through Saudi waters, then onto Kuwait.

Saudi Arabia hasn't agreed to the pipeline path because of political differences between the kingdom and Qatar.

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