Kuwaiti Oil Exports by End of Year

By John T Haldane

Despite initial pessimistic reports about heavy damage to Kuwait's oil sector, revised estimates indicate that the Kuwait National Petroleum Company (KNPC) may be able to begin oil exports by the end of this year.

The Oil and Gas Journal reports that KNPC's 370,000 barrels per day (b/d) Mina Al-Ahmadi refinery should be fully operational by June 1. Mina Al-Ahmadi piers received far less war damage than piers at Mina Abdullah, which had been used to import products for domestic use. While the Al Ahmadi north pier cannot be used for exports because its pumping facilities were badly damaged, priority repair work should have the pier back in operation in six months or so.

The Bechtel Corporation won a contract to serve as project manager to restore petroleum facilities. Work includes damage assessment, planning, engineering, procurement and contract services. Bechtel is soliciting bids from subcontractors for camp facilities to support an anticipated work force of more than 4,000.

UAE Faces Slow But Steady Recovery

Although the United Arab Emirates (UAE) was spared the worst effects of the war, financial experts believe that the country's post-war recovery is likely to be slow, with the chance of a slight recession before conditions improve next year.

Government leaders are giving top priority to efforts to revitalize the economy and revive the banking and commercial sectors. Saeed Juma Al-Naboodah, president of the Dubai Chamber of Commerce and Industry, states: "Businessmen and enterprises here have acquired experience in dealing with crises through the eight-year Iran-Iraq war. Therefore, we feel more confident than ever in our future."

Last summer, the UAE government and business community worked hard to sustain business confidence, pointing out that the country was a politically stable, free-market economy with wide access to all markets in the region, including Iran. Despite such efforts, local banks lost approximately 25 percent of their customer deposits in a flood of withdrawals in August and September, and importers ran down stocks rather than pay the high war-risk insurance on imported cargoes. Funds for private investment practically disappeared. Only rising oil revenues gave the government the money to proceed with a number of large-scale projects.

The cease-fire, however, has brought new optimism to the government and private sectors. Local business leaders predict a strong revival in local and regional demand. They point to the sudden increase in activities at the Jebel Ali port, which has become the entrepot for large shipments of machinery and equipment destined for Kuwait. The free zone in the port is playing a key role in the Kuwait Emergency Recovery Program, following the establishment of offices in the port by the Kuwait Petroleum Corporation and the Bechtel Corporation. Local bankers state that Jebel Ali has been taking nearly all Kuwait-bound cargo.

Continued high oil production this year will permit the government to increase capital expenditures and stimulate the economy. Several positive signs, such as new construction contracts, rising property prices and growing imports, point to an upturn in the UAE economy.

GCC Mideast Development Fund

The six Gulf Cooperation Council (GCC) states, Saudi Arabia, Kuwait, the United Arab Emirates, Oman, Bahrain and Qatar, agreed on April 22 to establish a new Middle East development fund, to be capitalized at $5 billion within 10 years, with a possible eventual total of $15 billion.

Saudi Arabian Finance Minister Mohammad Ali Abalkhail stated that the fund will be managed by a committee of heads of existing Arab development funds. The GCC is also seeking World Bank and International Monetary Fund (IMF) participation in the management of the fund.

Most of the capital will be supplied by Saudi Arabia, Kuwait and the United Arab Emirates, with lesser amounts to be provided by the smaller Arab Gulf states.

Most of the initial loans probably will be made to Egypt and Syria. Both nations have serious economic problems, and their firm support in the US-led coalition that freed Kuwait puts them first in line for financial assistance.

The decision to involve the World Bank and IMF indicates that the GCC wishes to attach firm conditions to any financial support provided by the fund, in contrast to the easier requirements of the existing bilateral and multilateral Arab aid agencies.

Egypt Welcomes Back Tourists

Egypt's tourist trade, which virtually ceased during the Kuwait crisis, is making a strong comeback. Fouad Sultan, Minister of Tourism and Civil Aviation, reports that Cairo airport handled 4,000 passengers a day in March and more than 8,000 a day in April. The previous winter's peak was 13,000 a day but tourist arrivals dropped by 80 percent at the beginning of 1991, resulting in lost earnings of about $1.5 billion for the 1990/91 season. Before the war, tourism ranked with the Suez Canal as a primary source of Egypt's hard-currency revenues.

Yemen Pushes Oil Exploration

The government of the Republic of Yemen has invited international firms to bid on oil concessions throughout the country. This new exploration campaign, which has attracted large oil firms from the United States, Western Europe and Japan, began early last year and already has resulted in the signing of 11 production-sharing agreements.

This success by the Yemeni General Corporation for Oil and Mineral Resources (GCPMR) is especially significant considering it was done at a time when the Kuwait crisis was causing a delay in new foreign investment in the Middle East. In addition, the newly formed republic, created by a merger of the Yemen Arab Republic and the People's Democratic Republic of Yemen, is in the throes of building a new government and consolidating two divergent bureaucracies.

The primary reason for international interest is that most of the concessions were awarded for areas in the Shabwa block in the central part of the country, the concession for which formerly was held by the Soviet Technoexpert firm. Promising oil finds were made by the Soviet company four years ago, but a series of technical delays postponed full development of the fields. It is estimated, for example, that the project to develop three fields in Block 4 and to lay a pipeline to export facilities on the coast is at least one year behind schedule.

The Shabwa block is especially attractive to foreign bidders since it contains reserves of light, sulfur-free oil, which is desired by environmentally conscious international markets.

San'a stands to enrich its treasury considerably through new exploration licenses. One industry observer estimates that initial payments for licenses awarded by the government in the second half of 1990 totaled as much as $200 million. The award for block 4 of the Shawba basin could boost this total considerably.

John T Haldane is an international economist and Middle East specialist.