$8.5 billion lost from suspended production at Khafji, Wafra oilfields

KUWAIT: A picture taken from Kuwait Gulf Oil Company’s website showing a part of the Khafji joint operations.

KUWAIT: An State Audit Bureau report showed that Kuwait lost $8.5 billion as a result of suspending oil production at the Khafji and Wafra oilfields, explaining that estimated losses at the former were $6.1 billion and $2.3 billion at the latter till Dec 31, 2016. The bureau explained that Kuwait Gulf Oil Company (KGOC) was responsible for suspending the joint operations and operation losses at Khafji were $1.1 billion, in addition to $685.7 million at Wafra.


The report added that KGOC also suffered further losses due to suspending the 3-D seismic surveying project that had already cost KD 22 million, in addition to cancelling 13 other projects in Wafra during 2016 with a total cost of KD 6.4 million and laying off 290 technical employees from Khafji and 211 from Wafra. “The closure will have a negative impact on Kuwait Petroleum Corporation’s reputation,” warned the report, noting that KGOC had contacted both governments of Kuwait and Saudi Arabia to discuss the suspension in view of partners’ insistence on suspending production.


In addition, the report said the cost of providing medical care to Khafji employees was $13.4 million despite the reduction in staff, after laying off 79 workers following the suspension of production. Moreover, the report said that the contractor hired to build and maintain the company’s new headquarters in Ahmadi at a total cost of $35.7 million delayed building temporary accommodations to house company employees, which delayed commencing construction works at the main building.


The report also noted that national workers in main office contracts had dropped to 2.2 percent (only 3 out of 134), which is far below the minimum of 25 percent required. It also showed that only KD 1.5 million had been spent on environmental projects instead of KD 5.7 million as agreed upon with the Environment Public Authority (EPA). The report showed that achievement ratios in projects such as a pipeline to transport Kuwait’s share of liquidated gas were far below planned expectations, which had predicted concluding the project on July 30, 2017.


Revenues dropped


Another State Audit Bureau report showed that revenues collected by the Ministry of Communications for the fiscal year 2016-2017 dropped by 70.5 percent. The report added that expenses, on the other hand, had increased by 3.1 percent and that the bureau failed to calculate the final statement because of delay in handing it over to the concerned bodies, which is a violation of articles 38 and 41 of decree number 31/1978 pertaining the rules of making budgets.


The report said that the most significant remark was related to failure to issue e-collection receipts on paying fines using K-Net at the air transport department, of a total value of KD 332 million. The report also noted that both departments and individual employees given leased vehicles to use during official working hours failed to return them when they were on leave.


No definition


A third State Audit Bureau report showed that the Public Authority for Housing Welfare (PAHW) has 292 vacancies and that the authority’s technical office had appointed 15 heads of department, three directors and five managers without defining the departments they ran, which is a violation of the authority’s structural organization. The report also explained that actual revenues made by the authority had increased by 126 percent compared to estimated revenues of KD 2.41 million, by earning KD 3,039,000.


In addition, the report showed that the authority made remarkable achievement in cutting down the time needed to connect power to sectors N1 and N3 in Jaber Al-Ahmed City from 730 to only 180 days, which is a good thing for citizens waiting for their housing units. On the other hand, the report said the authority failed to hand over project land to contractors without any impediments, which forced it to refund all delay fines to one of the contractors.


Credit Bank


Meanwhile, the State Audit Bureau report about the Credit Bank’s actual revenues said that it earned KD 3.71 million, with 4.2 percent increase in the fiscal year 2016-2017. The report added that actual expenses were 29.3 percent less than estimated. The report added that the bank’s net profits were KD 59,790,000, an increase of KD 17 million, to be added to the bank’s general reserves.




The Ministry of Public Works (MPW) formed a supreme committee to follow up preparations for the rainy season. The committee will be headed by undersecretary Awatif Al-Ghunaim. MPW said in a statement that all underpasses will be provided with early-detection alarm systems to monitor water levels in them and avoid flooding, like what happened last year. Ghunaim said the committee discussed preparations that had started in August as well as ways to handle any emergencies. She added that preparations were being done in collaboration with various bodies such as MoI, the National Guard, the Civil Defense and the Cabinet’s committee for following up security-related decisions.


Ghunaim added that the early-detection systems would send warning notices to a control room if water levels reach 30 cm in any underpass. The same notice is sent to MoI so that warning messages can be sent to all road users to avoid flooded tunnels. She added that preparations include cleaning all drainage systems, manholes and pipelines draining excess water into the sea.


Kuwait Airways


Minister of Social Affairs and Labor and Minister of State for Economic Development Hind Al-Sabeeh said a study by McKinsey recommended considering restructuring Kuwait Airways Corporation (KAC). Responding to a parliamentary inquiry by MP Osama Al-Shaheen, Sabeeh said a report on an IATA study made in 2013-2014 had recommended restructuring KAC with the process of privatizing it.


She added that KAC’s board of directors had taken the IATA study into consideration and that it is being fully assessed and updated according to new changes as a five-year first phase with a total cost of KD 469,000. She added that the second phase will cost KD 3,005,000 to implement the recommendations.


Responding to a question about the reason for purchasing planes, reselling them and then leasing the same planes, Sabeeh said that this was standard procedure used by various airlines with the aim of cutting capital expenses and distributing financial operational risks between leased and owned assets, with the ultimate goal of providing enough liquidity and making more revenues.


Lease contracts


Deputy Prime Minister and Finance Minister Anas Al-Saleh said that 136 lease contracts by government bodies to rent buildings since 2013 until the end of 2017 with a total cost of KD 14 million were cancelled.


By A Saleh

This article was published on 11/11/2017