Page 9 - MEOG Week 27

MEOG ProJeCtS & ComPAnIeS MEOG
PNZ talks make headway
KuWAIt/SAudI
A breakthrough has come in the long-running dispute between Saudi Arabia and Kuwait about the operation of oil elds in their shared Parti- tioned Neutral Zone (PNZ).
reports emerged last week that progress was made during recent talks between the two governments.
No oil has been produced from the 5,700-square km PNZ since the elds were shut down because of disagreements between the two governments in 2014 and then again in 2015.
Production of a combined total of circa 500,000bpd from the offshore Al-Khafji and onshore Wafra elds has been shut down since 2014/15, with divisions within the Kuwaiti gov- ernment said to be among the main factors pre- venting a restart.
Al-Kha i was shut down on riyadh’s orders in 2014, purportedly over environmental viola- tions, depriving the equal partners of combined output of around 250,000bpd.
O cial statements on a restart have hitherto come almost entirely from Kuwait. e smaller state is by far the needier of the two, with mini- mal spare capacity beyond the 3.1mn bpd avail- able from domestic onshore elds.
A series of contracts placed in 2018 by the o shore area’s operating company, Kha i Joint Operations (KJO) sent signals that work was intensifying on-the-ground in anticipation of an imminent restart. KJO is a joint venture of units of the government-owned Kuwait Petro- leum Corp. (KPC) and Saudi Aramco. Five-year engineering services contracts were let to Cana- da’s SNC Lavalin in February and to Japan’s Toyo Engineering in July, the latter explicitly linked by the contractor to a planned return to production.
On September 5, UK-based Oil Plus announced the award of a contract by KJO to carry out water-injection compatibility studies and engineering work.
The status of thornier negotiations on the
onshore PNZ and production at the Wafra eld that is part of the complex that has a capacity of around 250,000 bpd, remain unclear. e Saudi share is controversially operated by the US’ Chevron – the only foreign oil company granted such upstream rights by either government.
e US major shut down operations in mid- 2015 on the grounds that the rm’s work was being frustrated by the Kuwaiti authorities, allegedly born of long-standing pique at riyadh’s renewal of the US company’s concession in 2009. This was compounded by a dispute that had erupted two years previously over land leased by Saudi Arabia to Chevron in the Al-Zour area, where a multi-billion dollar integrated down- stream hub is under development by KPC.
Kuwait has a long-stated goal of increasing oil production to 4mn bpd by the end of 2020, and with only 3.65mn of this due to be produced onshore, the restart of output from the PNZ is vital for the target to have any chance of being realised.
While a nal agreement has yet to be reached, Bloomberg quoted sources close to proceedings as saying that a meeting could be held in Kuwait this month, with both sides keen to come to terms and work ongoing to nalise “technical details”.
marjan call
While talks proceed on the PNZ, riyadh is building out its own upstream capacity, and this week Saudi Aramco was reported to be close to awarding a $1bn contract for increasing output from the Marjan eld. A consortium of India’s Larsen & Toubro and Norwegian rm Subsea 7 were said to be set to sign a deal this week by Upstream on July 8, citing industry sources.
Both parties are signatories of Aramco’s prized long-term agreements (LTA), which pro- vides a signi cant platform for major engineer- ing work in the country’s upstream.™
Source: S&P Platts
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