The Oil Sector

The Constitution

In general, the oil resources in Kuwait are owned by the State by virtue of the constitution. The exploitation, management and investment of these resources have been by law delegated to various institutions.

The relevant constitutional provisions are:

Article 21:

"All natural resources and all of their income shall be the property of the State, which shall be responsible for their safe keeping and utilization, taking into consideration the national economic and security concerns."

Article 152:

"Every concession for the exploitation of any resource of the natural resources or public utility shall not be created except by a law and for a specified period, and the preliminary procedures shall ensure that the search and exploration activities achieve publicity [openness] and competition."

Article 153:

"Every monopoly shall not be granted except by a law and for a specific period of time."

The above provisions raise serious constitutional requirements that are relevant to our opinion. According to the Constitution, all natural resources including gas are owned by the State, which is entrusted with the safe keeping and exploitation of these resources taking into consideration the national security and the national economy. The Explanatory Memorandum to the Constitution provides that, the State has to take into consideration the general national economic plan when exploiting a natural resource. This plan is of utmost importance and must be set out in a law (Explanatory Memorandum to the Constitution P. 67, Kuwait Constitution and Laws Mahmood Al-Rashood Fifth Edition).

The Explanatory Memorandum to the Constitution explains Articles 152-153 in the same paragraph. It provides that: "The two provisions require the granting of a concession (Talzeem or Imtiyaz) or a monopoly to be through a law. This requirement applies prospectively as of the effective date of the Constitution so that all obligations granting concessions and monopolies that were granted prior to the enactment of the constitution remain in force. However, they may not be renewed or amended after that date except by a law and they must be for a specified period of time.