The “Shahin” Project: A Strategic Investment or a Loan?
The “Shahin” project has sparked widespread debate regarding its nature: whether it constitutes a strategic investment to develop the oil sector’s infrastructure, or if it is essentially a financial borrowing arrangement structured as an investment to avoid recording it as direct debt in the Kuwait Petroleum Corporation’s (KPC) books, with all the associated financial implications and repercussions on its financial standing.
The financing amounts to approximately $16 billion, with a maturity period of 20.5 years, and is earmarked for developing Kuwait’s crude oil pipeline network, which comprises 13 lines totaling 320 kilometers within Kuwaiti territory.
According to the disclosed structure, three of the world’s largest investment funds—Blackstone, Brookfield, and KKR—will manage these assets under a model based on external financing and asset leasing.
This project marks a significant shift in the financing philosophy of Kuwait’s oil sector, opening the door to the involvement of global banking consortia, alongside local banks, to finance one of the state’s most critical and sensitive assets: the crude oil sector, which has long remained outside such financing structures. Under this model, the pipelines are leased to the investment consortium, which then subleases them to Kuwait Oil Company (KOC), in exchange for financial commitments estimated at $800 million annually throughout the contract duration.
However, this move raises questions that extend beyond the financial aspect. If the state has decided to open up to external financing, why not extend this openness to broader investment partnerships or partial privatization of certain oil activities? Why not reconsider the status of companies that were originally privately owned, such as Kuwait Tanker Company and Kuwait Petrochemical Industries Company, especially given that Kuwait National Petroleum Company (KNPC) was 40 percent privately owned before its full transfer to state ownership?
The current phase calls for a comprehensive review of the performance of Kuwait’s oil sector and its affiliated companies, not only from a financial perspective but also in terms of efficiency, productivity, and competitiveness. It is essential to compare the performance of these companies with their regional counterparts, such as Saudi Aramco, Abu Dhabi National Oil Company (ADNOC), and Bahrain Petroleum Company (BAPCO), as well as with major global oil firms, to identify strengths and weaknesses and to formulate development plans based on clear performance indicators.
Another equally important question arises: Was an independent, scientific review conducted on the performance of Kuwait’s oil companies before and after their transition to full state ownership? Did this transition positively impact efficiency, profitability, and management? The Court of Audit may be the most suitable entity to conduct such a study, given its supervisory expertise and institutional relationships, which enable it to perform professional comparisons with national oil companies in Gulf states, thereby aiding in the evaluation of government policies regarding the management of this vital sector.
On another note, the project has raised specific concerns among experts regarding why it is limited to crude oil pipelines and excludes other assets. Why did it not include product pipeline networks belonging to the Al-Ahmadi Refinery, Abdullah Port, and Zour, or certain companies whose partial privatization could generate direct revenue for the state? This is particularly relevant given the ongoing budget deficit and the need to enhance liquidity, rather than relying on external borrowing.
Here, the Kuwait Oil Tanker Company stands out, with its activities limited to the transportation of crude oil, petroleum products, and gas, as well as the Petrochemical Industries Company, which maintains strategic partnerships with global firms, including the US-based Dow Chemical. Additionally, a portion of shares in the Kuwait National Petroleum Company (KNPC) could be floated to the private sector, providing the state with immediate financial resources and re-engaging investors in the responsibility of developing these companies and financing their expansions, while also allowing citizens to participate through public offerings—a model supported by Kuwait’s successful economic experiences over the past decades.
Ultimately, the “Shahin” project could mark a turning point in the trajectory of Kuwait’s oil sector, if it serves as a precursor to a calculated opening to external financing and investment, grounded in transparency, governance, and sound management, rather than merely serving as an alternative form of borrowing. It could also represent a step within a broader vision to develop the oil sector, enhance its competitiveness, and achieve the strategic goal of raising Kuwait’s crude oil production to four million barrels per day by 2035, alongside increasing refining capacity, modernizing refineries, and expanding investment partnerships that serve the national economy and preserve oil wealth for future generations.
