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'Kuwait's oil industry

needs to settle

unresolved questions'

KUWAIT: Kuwait's oil industry needs to settle unresolved questions about political support, foreign involvement and tender procedures, a U.S. embassy report said.

Solutions to these issues would boost "superb" expansion plans that are likely to provide many business opportunities for local and foreign firms and increase Kuwait's role in the world oil market, an embassy survey of the Kuwait oil industry said.

"In an era of tight budgets, when Kuwait can already produce more than allowed by its OPEC quota, (state-owned) Kuwait Petroleum Corporation must convince parliament to continue to fund further capacity expansions," the report said.

"Secondly, in an era when international oil companies are being welcomed back by other oil producing states, Kuwait needs to decide what role, if any, international oil companies should play in maintaining its position in an increasingly competitive industry."

"Finally, if Kuwait is to have the agility to respond to future oil market forces, the country desperately needs to develop a more streamlined, transparent process for soliciting and awarding bids for major projects."

Kuwait plans to spend $15 billion to raise capacity to 3.5 million barrels per day (bpd) by the year 2005 from almost 2.5 million at present. It has an Organisation of Petroleum Exporting Countries allocation of 2.0 million bpd.

Executives at state-owned KPC are examining ways of developing wells with foreign capital and technical expertise in return for granting foreigners some form of participation.

But diplomats say slow decision-making in some construction contracts could delay expansion. An example is a $400 million contract for construction of two gathering centres in western oilfields to raise overall output capacity by 400,000 bpd.

The embassy said an award had been expected for two years and still "it is not clear when the project will go forward".

The embassy said planned expansion in crude output, refining and petrochemicals would make Kuwait a more important supplier in world energy market.

Increased integration downstream, particularly in petrochemicals, should provide Kuwait with a broadened industrial base and joint venture opportunities for U.S. and other foreign firms.-Reuter