Dow expected to claim US$2.5 bln in compensation for scrapped K-Dow Petrochemicals joint venture in Kuwait

30-Dec-11

Dow is expected to claim US$2.5 bln in compensation for a scrapped joint venture in Kuwait. However, the compensation is subject to the verdict of the court, which is currently reviewing whether the Gulf state has breached the contract or not. On December 1, 2008, Dow Chemical and Petrochemical Industries Company, a wholly owned subsidiary of Kuwait Petroleum Corporation (KPC), signed a US$17.4 bln Joint Venture Formation Agreement regarding the formation of K-Dow Petrochemicals, a 50:50 joint venture, which was touted to emerge as the leading global supplier of petrochemicals and plastics. The new company was expected to be operational by January 1, 2009. Petrochemical Industries Co was also set to pay Dow US$7.5 billion for its stake in the project. However, the deal was scrapped at the eleventh hour by the Kuwaiti government without any prior notice. The main reason cited for the termination of the deal was the plunge in oil prices from the rich levels that they were trading when the K-Dow Petrochemicals joint venture was announced.