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Strategies & Market Trends : Countries

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From: Sam Citron3/20/2009 1:58:16 PM
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Kuwait Cancels Refinery Contracts [WSJ]

Kuwait National Petroleum Co. has canceled more than $10 billion in contracts for a refinery project, including $2.1 billion in remaining value to Fluor Corp., amid the slump in fuel prices and the project's burgeoning cost.

Share of Fluor, which reported the cancellation of its contract Friday, fell 3.6% to $37.42 in premarket trading as the move will cut the company's backlog as of Dec. 31 by some 6%.

Four South Korean companies earlier said the state-run Kuwaiti oil firm canceled $8.36 billion in refinery orders awarded them in May.

The $15 billion refinery project appeared in limbo earlier this week days after it was reported that Kuwait's former prime minister had ordered its cancellation in a further sign that political chaos in the state was taking its toll. Both the project's sponsor, KNPC, and the international contractors building the refinery said earlier this week they were unaware the project had been scrapped.

Kuwait's ruler dissolved Parliament Wednesday and called for fresh elections, a move that could end weeks of a political deadlock that has stalled an economic bailout program for the Gulf nation's banks.

The project came under increased scrutiny last year after opposition members of Parliament alleged that KNPC's contract awards didn't comply with the tender procedures set out by Kuwait's Central Tenders Committee, which handles all public sector contracts. The project was subsequently referred to the State Audit Bureau, the country's accounting watchdog.

The project's scrapping comes three months after Kuwait's Parliament forced state-owned Petrochemical Industries Co. to pull out of a planned $18 billion joint-venture deal with U.S. chemicals giant Dow Chemical Co.

Fluor had approximately 300 employees performing engineering work on the al-Zour project. The refinery was to have been Kuwait's fourth, handling 615,000 barrels a day of crude, with the intent of producing low-sulfur fuel oil for the country's power plants from 2012.
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