Kuwait could be about to follow Saudi Arabia's lead. OPEC's fifth-largest crude producer may partially privatise its state-controlled oil industry. That could generate billions of dollars for the government. But maximising proceeds will probably mean ceding more control over crude still in the ground than the emirate's rulers want.
Undersecretary of Finance Khalifa Hamada told the Kuwait Times on Tuesday that the country may copy Saudi's selloff plans. The kingdom has set out towards an initial public offering of up to 5 percent of Saudi Aramco, potentially the most valuable company on the planet.
Kuwait pumps only about a fifth as much crude as Aramco. Its reserves are nearly 40 per cent as plentiful as its neighbour's. Neither Kuwait Petroleum Corporation (KPC) nor the Saudi oil giant provide much financial information. It's also not clear how the two companies' cashflows could be shared with outside investors without public finances taking a hit on a continuing basis. Still, Saudi reckons Aramco could be worth more than $2 trillion.
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The economic realities could yet change that thinking. Like Saudi, Kuwait faces fiscal problems caused by a 57 per cent drop in the price of oil in two years. According to Moody's Investors Service, both countries are expected this year to record their first current account deficits since 1998.
Kuwait's hopes could be stymied for other reasons, too. Governance of its oil industry has been unstable, with 11 different oil ministers over the last decade. Contrast that with Saudi, which in May changed its top energy leadership for the first time in over 20 years. Kuwaiti oil workers also went on strike in April over proposed pay reforms.
Hamada's statements suggest appetite among Kuwait's ruling classes for privatising the most valuable part of the oil industry may not be uniformly strong. If they want the big bucks, though, they'll have to persuade investors that they're buying a stake in crude reserves that can't be easily taken away.
