Jan. 12 (Bloomberg) -- Kuwait appointed Sheikh Mohammed Sabah Al-Salem Al-Sabah acting oil minister as the third-largest OPEC producer formed its fifth cabinet since February 2006 after opposition lawmakers forced the previous government to resign.

Political turmoil has stalled economic reforms in the Persian Gulf state as the executive and legislative wings remain at loggerheads. A bill on the sale of state-owned assets has been held up in parliament since 1992, while another law allowing foreign companies to develop the country’s northern oil fields and one on regulating the Kuwait Stock Exchange have also been delayed.

Sheikh Mohammed, who will also be the emirate’s foreign minister, replaced Mohammed al-Olaim, while Finance Minister Mustafa al-Shimali retained his place in the 15-member cabinet headed by Prime Minister Sheikh Nasser al-Mohammed al-Sabah, a nephew of Emir Sheikh Sabah al-Ahmed al-Sabah, state-run Kuwait News Agency reported today.

The government resigned Nov. 25 as parliament prepared to set a date for questioning the prime minister over a visit to the country by an Iranian cleric accused of insulting the Prophet Mohammad’s companions.

Investments

Al-Olaim, who was also electricity and water minister, had been under intense pressure from opposition lawmakers on the country’s plans to build a fourth oil refinery and a Dow Chemical Co. joint venture on grounds they are overpriced and did not follow regulations.

Dow said on Jan. 6 it plans to seek more than $2.5 billion in damages from Kuwait, which announced Dec. 28 it had scrapped a deal to create K-Dow Petrochemicals. State-run Petrochemical Industries would have paid $7.5 billion for a 50 percent stake in Dow plants and technology used to make plastics and other products.

“Most likely the fourth refinery will not see the light, because of the comments of the Audit Bureau and opposition MPs,” Kamel al-Harami, an independent oil analyst, said today in a phone interview from Kuwait. “I don’t think as acting oil minister Sheikh Mohammed will look at and discuss major projects. It’s not fair to have him take this post and immediately take a decision on the fourth refinery.”

Kuwait in May last year awarded contracts to JGC Corp. and South Korea’s GS Engineering & Construction, SK Engineering & Construction Co., Daelim Industrial Co. and Hyundai Engineering & Construction Co. to build a $15 billion refinery in Al-Zour. The Audit Bureau, tasked with examining whether the procedure to award the contracts was legal, determined that the project involved some legal violations and is not economically or technically feasible, local newspapers reported.

Kuwait, which produced 2.5 million barrels of oil a day in December, is the third-largest producer of crude in the Organization of Petroleum Exporting Countries after Saudi Arabia and Iran.

The new cabinet includes two women and two members of parliament. The key posts of interior, defense and foreign affairs were all retained by the ministers who held them previously, all of them from the ruling Al-Sabah family.

To contact the reporter on this story: Fiona MacDonald in Kuwait FmacDonald4@bloomberg.net

Last Updated: January 12, 2009 09:04 EST