The hotly contested deal of Kuwait oil conglomerates and US based DOW chemicals which was slated at US$ 17.5 billions has been scrapped by Kuwait. This deal was subjected to major scrutiny for last couple of weeks in Kuwaits political, business and public arena. The timing for scrapping this deal was ofutmost importance because of the Jan 1, 2009 deadline. If the discussions had gone through till Jan 1 and beyond the party(s) responsible for walking out would have had to pay upto US$ 2.5 billions in compensation.

The reasons for opposition to this deal stem primarily from the worsening Global economic conditions.

Statement by DOW:

Today, The Dow Chemical Company has been verbally informed by our partners at the Kuwait Petroleum Corporation (KPC) and Petrochemicals Industries Company (PIC) about a decision made by the Kuwait Supreme Petroleum Council (SPC), to reverse its prior approval of the agreement between Dow and PIC to enter into K-Dow Petrochemicals, a planned 50-50 joint venture company.  The partners have informed us that there will be official written notification of the decision within the next few days.

Dow is extremely disappointed with the decision, and is in the process of evaluating its options pursuant to the Joint Venture Formation Agreement. While disappointed in this outcome, Dow remains committed to its Middle East Strategy.

PRESS RELEASE from DOW [LINK]