Page 7 - MEOG Week 01

MEOG Commentary MEOG
Agreement signed
to allow resumption
of PNZ output
An agreement was reached in December by the Gulf neighbours to resume production from the shared area, allowing Saudi to perform maintenance at other assets and Kuwait to add to its capacity.
saUdI/KUWaIt
What:
Kuwait and Saudi Arabia have reportedly reached an agreement to resume production from the fields of Khafji and wafra in
the neutral zone shared by the neighbouring countries.
Why:
The parties reached
a consensus that the time is right to resume operations from the often-contentious area, though they maintain this will not impact commitments to OPEC cuts.
What next:
According to officials, the countries agreed to allow Chevron to complete its works in the Mina Al Zour area.
KUWAIT and Saudi Arabia have put more than five years of differences behind them by signing a new deal for an oil-rich area known as the Neu- tral Zone to which both have territorial claims.
As reported by MEOG in August, no oil has been produced from the 5,770-square km bor- der area since the fields were shut in because of disagreements between the two governments in 2014 and then in 2015. At that time, the Kuwait News Agency (KUNA) quoted a government spokesman as saying that the sides were work- ing to complete “all technical issues required” before beginning discussions about resuming oil production.
On December 24, they agreed to divide the area between them and signed a new agreement to divide the area between them and a memoran- dum of understanding (MoU) to resume oil pro- duction from shared fields in the zone, following the suspension of activity in 2014.
The agreements were signed by Saudi energy minister Prince Abdulaziz bin Salman, his Kuwaiti counterpart Khaled Ali Al-Fadhil and Kuwait’s foreign affairs minister Dr. Ahmed Nas- ser Al-Mohammed Al-Sabah.
Prince Abdulaziz indicated that produc- tion at the offshore Al-Khafji field will resume
gradually but should reach 325,000 barrels per day (bpd) by the end of 2020. Production at the onshore Wafra field should also soon restart. However, both sides have also said this will not lead to them increasing their overall production levels, as set out in agreements with other mem- bers of the OPEC oil cartel.
Presumably then, the output increase will be used to allow for other fields to be shut in for maintenance without resulting in falling produc- tion. This is of importance to both countries with Saudi continuing efforts to maintain production and Kuwait keen to ramp up its own output fol- lowing failed attempts to reach ambitious targets.
Welcome news
Saudi Aramco welcomed the development, with CEO Amin Nasser saying “Both parties have reached consensus that now is the right time to resume production in this zone. Both sides will work to ensure production resumption at the earliest opportunity.”
The agreement could pave the way for fur- ther developments too. Prince Abdulaziz said on December 25 that plans to develop the Dorra gas field may also soon move forward, after many years of dispute. The official Saudi Press Agency
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