Kpc: Merger Of Subsidiaries, Kuwaitization And Corruption Probes

In a concerted bid to slash capital spending by 25 percent over the next five years, Kuwait Petroleum Corporation (KPC) has reportedly hired a global consultant to help merge its subsidiaries and become a leaner, more efficient enterprise.

The report, carried by several international media outlets, added that the country’s Supreme Petroleum Council, headed by His Highness the Prime Minister Sheikh Sabah Al-Khalid Al-Sabah, which has overarching responsibility over Kuwait’s oil industry, is said to have approved the merger plan.

KPC, the parent company for eight subsidiaries that are engaged in various upstream and downstream oil industry activities in Kuwait and abroad, is reported to be planning on merging and consolidating activities at these subsidiaries so as to streamline operations and increase efficiency, as well as trim its five-year capital spending to KD19.8 billion.

As part of this expenses trimming process, the oil giant is said to have already cancelled several projects while shelving others, including in the exploration field. In this regard, the parent company is understood to have recently postponed some of the foreign acquisitions and upstream exploration plans by its subsidiary, Kuwait Foreign Petroleum Exploration Company (KUFPEC). It was reported that in order to set the stage for internal consolidation KPC reorganized the senior management at each of its eight subsidiaries last year.

The streamlining plan is expected to take around two years to complete and could see KUFPEC, Kuwait Oil Tanker Company (KOTC), Kuwait Integrated Petroleum Industries Company (KIPIC) and Kuwait Gulf Oil Company (KGOC) integrated into other subsidiaries of KPC. Oil income accounts for around 90 percent of the country’s revenue, and with oil prices dropping by over 30 percent this year, Kuwait is keen to curb government spending and to cut expenses in other areas, as well as increase the efficiency of many state-run enterprises. KPC had said in 2018 that it planned to spend about KD150 billion on capital projects until 2040, now however, the company is looking at additional cuts beyond the 11 percent reduction in operating expenses that it has planned for this fiscal year.

As an integral part of this realigned priorities, KPC is said to have given its blessings to its subsidiary, Kuwait National Petroleum Company (KNPC) to scrap its plans to build an ambitious renewable energy project, the 1.5 GW Dibdibah Solar Project, which was estimated to cost around KD300 million. A source at KNPC was quoted as saying: “KNPC is still awaiting response from the government after a long delay in the execution of this vital project … it could be either awarded to the lowest bidder from the last tender, or it could be re-tendered at a later date to save funds, looking at the rapid pace at which technological advancements are taking place in this industry. It is also possible that the project could be scrapped altogether.”

Kuwaitization at KPC: KPC has been at the forefront of the country’s Kuwaitization drive that aims to replace foreign workforce in the country with citizens. The Corporation has already replaced thousands of expatriates with citizens in administrative and technical fields, both in its headquarters and within its subsidiaries. Employee recruitments that were stopped in March due to the coronavirus pandemic and subsequent preventive lockdown of the country, is reported to have resumed in full swing since the end of a full lockdown period. Those who had submitted their applications in January have already been interviewed and tests for English language proficiency and specialization skills will be completed within the coming two weeks, said a source knowledgeable about these matters.

Employment mechanism in the oil sector is reported to be among the top priorities for the Minister of Oil and Acting Minister of Electricity and Water, Dr. Khaled Al-Fadhel and the CEO of the KPC Hashem Sayed Hashem. Both are said to be keen to ensure employment for the largest number of Kuwaitis in the oil sector. According to one report, more than 5,226 Kuwaitis have been employed in KPC and its subsidiaries in the last five years, and that the oil major continues to work with educational institutions in the country and abroad to hire qualified nationals in various disciplines in accordance with employment plans that define the needs of the oil sector.

Corruption to be weeded out: In the meantime, it has been reported that the Oil Ministry and KPC management are keen to weed out corruption from the oil sector. In this regard, it is to be noted that during the past five years, around 20 officials within the company have been referred to the Public Prosecution, the AntiCorruption Authority (Nazaha) and other investigative agencies for various crimes. KPC and its subsidiary companies also set up several internal investigative committees to examine administrative and other practices that were mentioned in reports by the State Audit Bureau. This internal investigation is said to have resulted in the 52 disciplinary penalties, including the dismissal of four officials from service without compensation.

The strict adherence to upholding the law by KPC and its subsidiaries is believed to have led to the recovery of over KD22.5 million of misappropriated public funds in recent years.

 

SOURCE : TIMES KUWAIT

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