Kuwait decided to chop 7 billion Kuwaiti dinars ($27 billion) off the budget allocated for oil projects in the current five-year development plan due to the impact of coronavirus on market demand, a local newspaper said on 14 July.
The government had earlier approved 27.7 billion dinars ($91.5 billion) in capital spending for its oil companies during the plan that started in 2019, Al Rai daily reports.
Allocations included nearly 16.8 billion dinars ($55.5 billion) for oil exploration and production inside Kuwait, the report said.
The state-owned Kuwait Petroleum Corporation (KPC), which manages the country’s hydrocarbon sector, has informed all affiliated firms it would slash the budget by more than 29 percent as instructed by the government.
“KPC said it was compelled to trim the five-year budget as part of overall spending rationalization in Kuwait due to the difficult global economic conditions caused by the COVID-19 pandemic,” it said, adding that this year’s budget would be trimmed by nearly 1.3 billion dinars ($4.3 billion).
To implement the decision for austerity measures and reduce expenses, Kuwait Petroleum Corporation (KPC) and its subsidiaries have started to cancel many unimportant tenders and contracts within the budget of the current fiscal year, revealed the CEO of KPC Hashem Al-Hashem. The sharp decline in oil revenues and to handle the economic consequences of the COVID-19 pandemic, the services of expat employees in government and private contracts as well as subcontractors will be terminated with the aim to reduce spending, reports a local daily.
KOC has canceled the Ahmadi City buildings project, considering it as a non-strategic project, and also ended a contract for the supply of connections to the wells, in part due to the high costs, but may consider re-offering it again. The KD 551 million-worth Al-Dabdaba solar energy project was recently canceled too. Once completed, it would have provided 15 per cent of the oil sector’s needs from renewable sources. Some other projects have also been canceled, but the details will be revealed later.
Meanwhile, the Petrochemical Industries Company scrapped all the preparations for the annual meeting of the leaders of the oil sector, including the bookings for travel tickets and hotels, the work of mobile equipment rental for the polypropylene plant, electrical maintenance and precision machinery for the factory in addition to a number of other contracts.
On the other hand, the Kuwait Integrated Petroleum Industries Company (KIPIC) will extend the bids of two huge contracts with the Central Agency for Public Tenders. The first contract intends to hire engineering consultancy services for projects and administrative services. The project has been extended to November 10, 2020 with the date of the preparatory meeting set for September 13, 2020. As for the second contract for maintenance operations at the LNG import facility, the financial offers have been extended to September 6, after the preliminary meeting was held on November 10, 2019.
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