Kuwait to scrap $14 billion refinery project

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 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.

The cancellation comes at a time of elevated tension between Kuwait's executive and legislative powers, and parliament members have accused the prime minister of wrongdoing and inadequacy.

Since the beginning of this month, five lawmakers have barraged Sheik Nasser with a number of 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 with a capacity of 615,000 barrels a day.

The state-owned Kuwait National Petroleum Co. said in May it has awarded the main $3.99 billion contract to build it to Japan's JGC and South Korea's GS Engineering and Construction Corp. Other South Korean companies were to build some of its facilities.

Bowing to lawmaker pressure, the Cabinet in December backtracked on a $17.4 billion joint venture with U.S. giant Dow Chemical Co., just days before the petrochemical project was to be launched. Legislators had threatened to question the prime minister in parliament because they said the deal was not transparent and too expensive.

The cancellation raised concerns about the country's credibility with foreign investors and the effect of local politics on the development of the oil sector, the mainstay of the economy.

Oil analyst Kamel al-Harami said 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.