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Kuwait to restart oil production in the PNZ’s Wafra field
KuWaIt
KUWAIT plans to resume oil production at Wafra field, shared with Saudi Arabia, by March, according to Oil Minister Khaled Al-Fadhel.
The field was shut down in 2014 after a spat between the neighbours. The disagreement esca- lated over the Wafra field, when Saudi Arabia extended the original 60-year concession for the field, giving California-based Chevron, through its subsidiary Saudi Arabian Chevron, rights there until 2039.
Kuwait was unhappy over the announcement and claims Riyadh never consulted it about the extension. Production has been inactive in the Neutral Zone for many years, with the offshore Khafji field shut down since 2014, followed by Wafra in 2015.
The fields in the Neutral Zone could produce up to 500,000 barrels per day (bpd), but this will likely have little impact on supply, since both Kuwait and Saudi Arabia are bound to produc- tion cuts agreed by the Organisation of Petro- leum Exporting Countries that will run until the end of March.
Kuwait’s parliament voted earlier in the day
to ratify the agreement the country reached with Saudi Arabia in December to resume production at their shared oil deposits. The so-called Neutral Zone’s capacity of 500,000 bpd is more than what each of OPEC’s three smallest members pumped last month.
Kuwaitis and Saudis alike have said a resumption would be unlikely to add significant amounts of oil to the market within the current duration of OPEC’s deal.
The Neutral Zone, spanning more than 5,700 square kilometres (2,200 square miles), was cre- ated by a 1922 treaty between Kuwait and the fledgling Kingdom of Saudi Arabia. In the 1970s, the two Gulf Arab monarchies agreed to divide the area and incorporate each half into their respective territory while still sharing and jointly managing the zone’s petroleum wealth. The region contains two main oilfields: the onshore Wafra and offshore Khafji.
Chevron, which operates Wafra with Kuwait Gulf Oil, said in December that it expected full production there to be restored within 12 months.™
Kuwait’s PNZ output to reach 250,000 bpd by end of 2020
KuWaIt
KUWAITI oil output from the Neutral Zone it shares with Saudi Arabia is expected to reach 250,000 barrels per day (bpd) when production restarts at the end of this year, the country’s oil minister said on January 23.
Kuwait and Saudi Arabia agreed last year to end a five-year dispute over the area in a deal which will allow production to resume at two oilfields that can pump up to 0.5% of the world’s oil supply; specifically, they agreed in December to resume oil production from the two oilfields they share in the Neutral Zone.
The so-called Partitioned Neutral Zone (PNZ) was established between Saudi Arabia and Kuwait in 1922 to help settle a territorial dis- pute between the two countries.
In 2015, the oil production capacity in the Neutral Zone stood at 600,000 bpd, equally divided between Kuwait and Saudi Arabia, according to the Energy Information Admin- istration (EIA). Production from the zone averaged around 500,000 bpd just before the
shutdown of the two oilfields, Khafji and Wafra, in 2014-2015.
Operational differences and a worsening in bilateral relations led to the suspension of pro- duction back in 2015. A factor in the worsening relations was Saudi Arabia’s renewal of Chevron’s concession for Wafra, said to have been made without consulting Kuwait.
The two neighbours now have agreed to restart the two oilfields, which could bring an additional 500,000-600,000 bpd on to the oil market. “Signing the memorandum of under- standing [MoU] means the return of production of250,000bpd...beforetheendof2020,”Reuters quoted Kuwait’s Oil Minister Khaled al-Fadhel as telling Parliament on January 23.
According to the minister, the 250,000 bpd additional production capacity from the shared Neutral Zone will not have an impact on Kuwait’s compliance with the ongoing OPEC+ produc- tion cuts. OPEC and its Russia-led allies are set to review the current pact in March this year.™
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w w w. N E W S B A S E . c o m Week 04 29•January•2020