Kuwait’s government decided on December 28 to cancel a $17.4 billion joint venture with U.S. petrochemical giant Dow Chemical. The venture, known as K-Dow, was announced with great fanfare in July as the crown jewel of economic development initiatives in Michigan.
Michigan, already home to Dow Chemical’s headquarters in Midland, had been slated to become the home as well to the new K-Dow Petrochemicals, a partnership between Dow and Kuwait’s Petrochemical Industries Company (PIC), a subsidiary of Kuwait Petroleum Corp.
According to the Associated Press, the venture became a political football in oil-rich Kuwait after the dual collapse of the global financial system and the price of oil during the fall. In a statement carried by the state-owned Kuwait News Agency (KUNA), the Kuwaiti government said the K-Dow venture was ”very risky” in the wake of the financial meltdown and cratering oil prices.
The K-Dow contract was canceled just a few days before a planned Jan. 1 startup date by the Supreme Petroleum Council, Kuwait’s highest oil authority, according to the statement from KUNA.
The project, in which Kuwait was to hold a $7.5 billion stake, reportedly had been criticized in Kuwait as ”a ”waste of public funds” and Kuwaiti lawmakers threatened to question the prime minister in parliament if it was launched. Such a move could have led to Sheik Nasser Al Mohammed Al Sabah’s impeachment, sparking a new political row in the country just weeks after the Cabinet resigned in protest after an effort by a group of Islamist lawmakers to question the premier over corruption allegations within the government, AP reported. Sheik Nasser was reappointed to his post though he has yet to form a new Cabinet.
Kuwaiti Oil Minister Mohammed al-Eleim defended the venture as profitable, saying it was carefully studied by international consultants for over two years. But Kuwait’s Cabinet said in its Sunday statement that it ”rejected” politicizing the issue.
The venture between chemical giant Dow and PIC was designed to enable the partners to snare the lion’s ‘hare of the global chemicals market. The new company was to be headquartered in the Detroit area.
Crude oil prices have plunged from mid-July highs of nearly $150 per barrel to a current level of under $40. The Kuwaiti stock exchange also has fallen by about 35 percent since the beginning of 2008. Dow announced in early December that it was cutting about 11 percent of its work force, closing 20 plants and selling off several businesses to cut costs amid the financial downturn.