Kuwait Petroleum Corporation

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KUWAIT PETROLEUM CORPORATION

National oil company of the State of Kuwait.

The Kuwait Petroleum Corporation (KPC) was formed in 1980 as a holding company for most of the state's hydrocarbon assets. These had been acquired through the nationalization of foreign-owned equities in the 1970s and through the purchase of domestic investors' shares of state-private joint ventures. Major subsidiaries include the Kuwait Oil Company (KOC), which develops and produces domestic oil and gas; the Kuwait National Petroleum Company, which refines and exports oil and gas products and markets them directly domestically; the Kuwait Oil Tanker Company, which operates crude, product, and gas carriers; the Petrochemical Industries Company, which produces, distributes, and markets petrochemicals; and the Kuwait Foreign Petroleum Exploration Company, which engages in exploration, development, and production of hydrocarbons outside of Kuwait, mostly through joint ventures. Among KPC's foreign subsidiaries are KPC International, parent of Kuwait Petroleum International (KPI), which supervises overseas refining and marketing operations.

KPC acquired refining, storage, and marketing assets in Europe during the 1980s to extend its vertical integration. It also acquired a U.S.-based firm, Santa Fe Braun, with drilling, construction, and production assets, but KPC gradually sold most of these operations as incompatible with its long-term corporate goals. The Iraqi invasion and occupation of Kuwait demonstrated the usefulness of KPC. Its character as the parent of European subsidiaries and affiliates attracted support from host governments; KPI's London offices ran operations outside of Iraqi control and coordinated planning for reentry and reconstruction following liberation. Reconstruction was made more difficult by Iraqi sabotage, which left 727 oil wells damaged, most of them on fire. The fires were extinguished and all the wells capped within nine months by nearly forty teams of firefighters from around the world, including from KOC.

In recent years, KPC has been planning for the privatization of some of its assets. Deciding what should be privatized and how has been contentious. Kuwait's constitution vests ownership of mineral assets in the state but does not prohibit foreign ownership of other than production assets. One model was worked out when Equate, a subsidiary of Petroleum Industries Company, itself a subsidiary of KPC, was established. Equate is owned 45 percent each by the government and Union Carbide and 10 percent by local shareholders, who have very little say in how the company is run. Other models include the direct sale of selected operations to a group of investors and the sale of a portion of equity in existing companies through an initial public offering, with or without restrictions on the nature and number of buyers. International oil companies are eager to acquire production interests in countries with high reserves, like Kuwait, which faces competition for their investment dollars from Russia, the central Asian republics, and Africa. With the privatization of Iraqi oil a likely legacy of the 2003 U.S.-British invasion, additional privatization of KPC's operations is highly likely, too.