<article><p>Kuwait's state-owned KPC is exploring legal avenues that could remove oil minister Ali Saleh al-Omair's power of veto over the board's decisions, a move has the potential to accelerate approvals for energy projects.</p><p>Many within KPC and the oil ministry expected al-Omair to resign in early June, after his plan to replace six of the nine KPC board members — al-Omair being one — was thwarted by Kuwait's emir Sheikh Sabah al-Ahmad al-Jaber al-Sabah, who rarely intervenes in such matters. But al-Omair attended the Opec meeting in Vienna last week and it looks unlikely he will surrender to to what KPC and ministry officials said was tremendous pressure to go. Instead, he is expected to appoint three new board members of his choice to accompany the existing six members, as suggested by the emir in what many officials saw as a conciliatory move.</p><p>Al-Omair's decision not to resign has helped generate support within KPC to seek legal advice on how to navigate the oil minister's veto. KPC's very early plans to erase, or at least reduce the oil ministry's power of veto to a case-by-case basis, marks a significant step in the firm's ambitions to operate as a separate entity entirely.</p><p>"We would like to see a similar set-up to what Saudi Aramco is trying to do," one senior KPC official said, referring to Riyadh's plans to separate state-owned Saudi Aramco from the oil ministry.</p><p>The oil minister's power of veto has long been a point of debate with KPC, but the latest dispute over the planned replacement of the board<b></b>has increased concerns al-Omair could more frequently exercise his right of veto to influence the effectiveness of KPC's chief executive Nizar Mohammed<b></b>Al-Adsani and the board.</p><p>"The amendment of the law is a must for the stability of Kuwait's oil sector and for eliminating the political interference. The process will not be easy, but it is worth a try," a senior KPC official told <i>Argus</i>. Al-Omair has used his veto up to four times since taking office in January 2014, primarily to reject the formation of KPC's board or new appointees in leadership roles within KPC and its subsidiaries. Al-Omair is also the only KPC board member that can call for a board meeting, for which he sets the agenda.</p><p>The infighting between the company and the ministry, as well as within parliament, has led to further delays to oil and gas projects that have already in some cases suffered set backs that have stretched into decades<b></b>and long frustrated international oil companies operating within Kuwait. KPC is particularly eager to reshape the sector's poor reputation.</p><p>Concerns have eased that al-Omair's plans to stay in his job would trigger the resignation of Al-Adsani and several chief executives of KPC's subsidiaries, as the board waits to see the effects of the latest changes. Al-Adsani is well regarded throughout KPC and several officials said his loss would prove damaging to the energy sector.</p><p>A basic level of co-operation between KPC and the oil ministry is pivotal to the robustness of Kuwait's economy. Revenues from oil and gas account for 70pc of Kuwait's GDP and 95pc of export revenues. Recent arguments mean decisions on oil and gas projects have largely been postponed, effectively stalling the country's biggest earner just as lower oil prices add pressure to the budgets and timetables of existing projects.</p><p>The political wrangling has spilled over into the country's downstream sector, with the start date for the 615,000 b/d Al Zour refinery pushed back by a year to 2020. The refinery, due to be one of the largest in the region, has already faced a decade of delays. KPC cancelled a meeting last week to discuss additional funding required by KNPC to start construction.</p><p>Al-Omair said in Vienna last week that Kuwait needs the oil price to rise to $77/bl to safeguard the country's 2015 budget forecast. The government cut spending by 18pc to KD19.1bn ($64.6bn) in its 2015 budget, basing its fiscal projections on a crude price of $45/bl and crude production of 2.7mn b/d. Under those projections, Kuwait faces a budget deficit of KD8.2bn.</p><p>"We are still surviving with our budget, but it is not the best situation," said al-Omair. </p><p>KPC is also battling mounting doubt over its ability to hit its 4mn b/d production capacity target by 2020. A spat with Saudi Arabia means it is losing up to 300,000 b/d of potential production from the two oil field shutdowns in the shared Neutral Zone. Kuwait is producing around 2.7mn b/d.</p><p>mm/bw</p><p><br> Send comments to <a href="mailto:feedback@argusmedia.com" target="_parent"> feedback@argusmedia.com </a></p><p><u><a href="http://www.argusmedia.com/Info/General/News" target="_TOP"> Request more information </a></u> about Argus' energy and commodity news, data and analysis services. </p><p><i> Copyright © 2015 Argus Media Ltd - <a href="http://www.argusmedia.com/" target="_TOP"> www.argusmedia.com </a> - All rights reserved. </i></p></article>