Kuwait Petroleum Corporation Develops Legislation to Keep Pace with Economic Growth and Create a More Attractive Investment Environment

Recognizing that Kuwait’s oil wealth is the cornerstone of the nation and the source of its economic strength, and implementing the legislator’s view that the most appropriate means of managing this oil wealth is the establishment of a public institution with an economic character, capable of managing the country’s oil industry in a manner that preserves it and maximizes state revenues from it, Decree-Law No. (6) of 1980 was issued to establish the Kuwait Petroleum Corporation (the Corporation). The provisions of the Decree-Law establishing the Corporation stated that it is a public institution with an economic nature and that it is the state agency responsible for undertaking all activities related to the petroleum and hydrocarbon industries in general, across all their stages, as well as for industries branching from, associated with, related to, or complementary to these industries, whether within the State of Kuwait or abroad.

Consistent with the philosophy of the Constitution of the State of Kuwait in regulating public institutions—which is based on guaranteeing the independence of these institutions in their affairs and limiting the state’s role regarding them to guidance and supervision—Article (133) of the Constitution of the State of Kuwait stipulates: “The law shall regulate public institutions and municipal administration bodies in a manner that ensures their independence under the guidance and supervision of the State.” Accordingly, the legislator granted the Corporation, in the Decree-Law establishing it, certain special provisions, given that it is a public institution with an economic nature, primarily engages in commercial activity, operates on commercial principles, and acquires the status of a merchant in its contracts with third parties. This necessitates a considerable degree of flexibility and speed in carrying out the Corporation’s activities and managing them, thereby ensuring its independence under the guidance and supervision of the State.

Updating the Law Establishing the Corporation: Broader Governance, Required Flexibility, and an Effective Supervisory Framework

More than forty-six years after the establishment of the institution by Law-Decree No. (6) of 1980, the legislator deemed it imperative to amend certain of its provisions. Accordingly, on June 23, 2026, Law-Decree No. (67) of 2026 was issued to amend certain provisions of the Law-Decree establishing the institution. It was published in “Kuwait Al-Yawm” in Issue No. 1797 on June 28, 2026. The amendments aimed to achieve several objectives, most notably:

* Enabling the institution to keep pace with the changes and developments occurring in the global oil industry.

* Enabling the institution to maximize Kuwait’s oil revenues.

* Strengthening the institution’s capacity to implement its updated strategy, approved by the Supreme Council of Petroleum, through 2040.

* Preserving Kuwait’s leading regional and global position in the oil and energy sectors.

* Removing certain obstacles that did not exist at the time of the institution’s establishment and which were subsequently imposed on the institution under other legislation, without regard to the institution’s economic nature and its commercial management basis, which requires speed and flexibility in decision-making.

* Ensuring the institution’s autonomy in its affairs under state guidance, without compromising state oversight as mandated by Article (133) of the Constitution of the State of Kuwait.

The most prominent amendments contained in Law-Decree No. (67) of 2026 included:

* Adding a new objective for the institution: to undertake all necessary measures to provide renewable energy for the institution’s needs and those of its wholly owned subsidiaries, following approval from the Ministry of Electricity, Water, and Renewable Energy to connect the electricity generated from renewable energy sources to the national power grid, in accordance with applicable regulations and requirements.

* Reorganizing the provisions governing the institution’s Board of Directors, which is responsible for its administrative affairs and defines its competencies, as well as redefining and expanding the competencies of the Supreme Council of Petroleum, without burdening it with administrative and executive functions that fall outside its original mandate as outlined in Decree No. (2) of 1974 establishing the Supreme Council of Petroleum. These original competencies consist of “formulating the general policy for petroleum resources to ensure their preservation, optimal utilization, and development of related and衍生 industries.”

* These amendments enhanced the clarity of competencies, roles, and decision-making pathways for investment and commercial matters within the institution.

* The legislator prohibited the use of local agents or commission agents to contract with the institution or its wholly owned subsidiaries, in any form, whether during contract conclusion or execution. This measure aims to reduce the financial costs borne by the institution and its subsidiaries due to mandatory intermediaries, to tighten oversight over contracts concluded by the institution or its subsidiaries, and to mitigate the risks of non-compliance with such contracts.

Continuation of Effective Oversight of the Institution

The legislation, regulations, and internal systems applicable to the Institution and its subsidiary companies strike a balance between the oil sector’s requirements for operational flexibility, speed in commercial and investment decision-making, and the expansion of competition on the one hand, and ensuring effective oversight of the oil sector on the other. This is because the funds of the Institution and its subsidiary companies are considered public funds, which all parties are obligated to protect and safeguard in accordance with the provisions of the Constitution of the State of Kuwait and the provisions of Law No. (1) of 1993 concerning the protection of public funds.

The Institution and its subsidiary companies have always been, and remain so even after the amendment of the Decree-Law establishing the Institution, subject to an effective oversight system while exercising their authorities and duties. This system includes:

- Post-audit oversight by the Court of Accounts over the Institution’s and its subsidiary companies’ operations and contracts.

- The Internal Audit Department of the Institution and its subsidiary companies.

- The external auditor appointed by the Supreme Council for Petroleum Affairs.

- The Legal Opinions and Legislation Administration and other competent oversight authorities.

A Package of Legislative Reforms Reflecting the State’s Efforts

To Attract Foreign Investment and Open the Market and Economy to All Investors Without the Need for a Local Agent

In recent periods, the State of Kuwait has witnessed a package of important legislative reforms, alongside the amendment of the Decree-Law establishing the Institution. These reforms aimed to implement Kuwait’s current economic orientations, which seek to open markets and the economy to all investors, attract foreign investment, remove obstacles to it, and foster competition to offer the best products and services at the lowest prices. These legislations have a direct impact on the contracts of the Institution and its subsidiary companies. Among these legislations of significant economic impact are:

1. Law No. (1) of 2024, which amended Article (24) of Decree-Law No. (68) of 1980 issuing the Commercial Law, and Article (31) of Law No. (49) of 2016 concerning Public Tenders. This law was published in “Kuwait Al-Yawm” in Issue No. 1671 dated January 21, 2024, and took effect from the date of its publication. The significance of this law lies in allowing foreign companies to establish branches in Kuwait and conduct their business there without the need for a mandatory local agent. The legislator clarified that the purpose of this amendment is to open markets and the economy to all investors, attract foreign investment, remove obstacles to it, and encourage competition to provide the best products and services at the lowest prices.

This amendment represents a significant shift in the business environment, as it removes a constraint that previously affected how foreign companies entered the Kuwaiti market, as well as their cost structures and contractual obligations. For the oil sector, this amendment is expected to broaden the base of companies eligible to participate in oil projects and in all contracts of the Institution and its subsidiary companies.

However, the elimination of the local agent requirement does not exempt foreign companies from licensing, registration, tax, labor, or other mandatory regulatory requirements. Nor does it permit contracts to be awarded directly without competition. Rather, the objective is to enable foreign companies to deal and contract directly, without a mandatory intermediary, while ensuring that the selection of contractors remains subject to applicable rules and procedures.

2 - Legislative Decree No. (94) of 2026 amending certain provisions of Law No. (49) of 2016 concerning Public Tenders, which was published in “Kuwait Al-Yawm” in Issue No. 1810 dated September 27, 2026, and will enter into force three months after its publication in “Kuwait Al-Yawm.” This legislation has reorganized the jurisdiction of the Central Tenders Committee (the Committee) and the purchasing committees within the Kuwait Petroleum Corporation (KPC) and its subsidiaries. It stipulates that the Committee is responsible for contracts exceeding 20 million Kuwaiti Dinars for standard procurement operations executed within Kuwait, while the purchasing committees within KPC and its subsidiaries are responsible for contracts not exceeding 20 million Kuwaiti Dinars. The aforementioned threshold may be increased by a Cabinet decision based on a proposal from KPC’s Board of Directors. Furthermore, the legislation exempts oil operations, as defined by law, from the provisions of the Public Tenders Law, regardless of their value, while respecting Article (152) of the Constitution. The principles of transparency, disclosure, commitment, governance, fairness, equal opportunity, and avoidance of conflicts of interest remain mandatory pillars in the rules and procedures governing oil procurement.

This legislation added a final paragraph to the provisions of Article (31) of the Public Tenders Law, stating that “the use of a local agent or commission agent is prohibited in all contracting procedures, in accordance with the rules approved by the Cabinet based on a proposal from the competent Minister, after coordination with relevant authorities.”

The prohibition stipulated in this article will apply to KPC and its subsidiaries upon the entry into force of this law’s provisions, as Article (18) of the amended Legislative Decree establishing KPC will be repealed, in accordance with Clause 2 of Article 3 of Legislative Decree No. (94) of 2026.

Summary

Legislative developments in Kuwait reveal a gradual transition from a traditional regulatory framework for the oil sector to a more specialized, flexible, and competitive system. This system has preserved the state’s sovereign role in managing petroleum resources, while simultaneously enhancing the Kuwait Petroleum Corporation’s ability to operate independently based on economic and commercial principles under state guidance and effective oversight. It has also enabled foreign companies to enter the market without a local agent and has redistributed jurisdiction over the regulation of procurement contracts related to the oil sector.