State-owned Kuwait Petroleum Corp (KPC) has sacked the heads of all of its eight subsidiaries in the company’s largest ever shakeup, following a controversial $2.2bn compensation payment to US firm Dow Chemical, according to local media.

Kuwait Oil Co managing director Sami Al-Rasheed, the country’s longest serving oil executive, was replaced by Hashem Hashem, while Kuwait National Petroleum Co (KNPC) managing director Fahad Al-Adwah will retire, to be replaced by Mohammad Al-Mutairi, and Asaad Al-Saad will take over from Maha Mulla Al-Tarkait as managing director of Petrochemical Industries Co (PIC).

Tarkait and several other leading officials at PIC had been suspended on Thursday over the $2.2 billion penalty payment to Dow Chemical and the whole issue was referred to the public prosecution.

The changes follow the suspensions of three top officials, including Tarkait, and the replacement of KPC’s CEO Farouk Zanki with Nizar Mohammad al-Asani on Thursday.

The shakeup is seen as being in response to a $2.2bn damages payment to Dow Chemical Co after PIC pulled out of $17.4bn K-Dow petrochemical venture in December 2008, citing the deteriorating global economy.

K-Dow was a politically sensitive deal and last year the International Chamber of Commerce's International Court ruled that PIC had violated its agreement with Dow Chemical.

Lawmakers had called on the government to refuse to handover the money and the payment has caused recent unrest in the parliament, which had been experiencing relative stability following years of clashes.

Last week, the National Assembly was unable to sit on two consecutive days due to spats between the government and other parliamentarians.

However, in a statement, KPC denied the movement was linked to the political crisis over Dow, claiming it was restructuring the oil sector to be able to cope with current and future challenges and to inject fresh blood into the sector.

Each of the subsidiaries also will now have a chairman as well as a managing director.