Page 5 - MEOG Week 05 2022

MEOG COMMENTARY MEOG

production of 700,000 bpd. relations have been resolved, a source told S&P
Then following a visit to Kuwait by Saudi Global Platts in April 2021 that the parties were
Crown Prince Mohammed bin Salman (MbS) in “doing a lot of work on those to make sure the
December, the Saudi Press Agency reported that production is sustainable from Wafra and
the parties were working to implement the terms Khafji”, adding: “there is a three-way dance on
of a memorandum of understanding (MoU) on paper that is very good.”
the development of the PNZ and that work is The importance of the relationship extends
ongoing to ramp up output from the offshore beyond the Kuwaiti and Saudi borders, though,
Khafji and the onshore Wafra oilfields. and it is no coincidence that higher production
Khafji (300,000 bpd) and Wafra (250,000 has coincided with an easing of OPEC+ restric-
bpd) were previously capable of producing a tions and oil price stability.
combined 550,000 bpd, but they were shut in On the flipside of this, the cuts have also
because of disagreements between the two gov- reduced the development of the Khafji and
ernments in 2014 and then in 2015. Wafra assets and sources quoted by Platts said
Before shutting down, the assets were pro- last year that these have given the neighbours
ducing 280,000 bpd and 175,000 bpd respec- an opportunity to carry out rehabilitation work
tively, with Argus Media this week quoting to address subsurface, seismic and geological
sources as saying that combined output is now issues and prepare the fields to reach their for-
around 300,000-320,000 bpd. mer heights.
As the group’s cuts continue to be eased, the
Stability PNZ provides a convenient opportunity for the
Operations at Khafji are managed by Khafji Joint neighbours to each add up to 275,000 bpd to
Operations (KJO), which is jointly run by Kuwait their net output as state oil firms Aramco and
Gulf Oil Co. (KGOC) and Saudi Aramco subsid- KOC seek to raise their respective maximum
iary Aramco Gulf Co-operation Co. (AGOC). sustainable capacities (MSCs).
Saudi Arabia is represented by Saudi Ara- Aramco, which is increasing its crude slates
bian Chevron (SAC) in Wafra Joint Operations from 12mn bpd to 13mn bpd by 2027, does
(WJO), with KGOC again representing Kuwait. not include PNZ output in its MSC. However,
While environmental and contractual con- the PNZ does feature in KOC’s MSC, which its
cerns were cited as the reasons for the lengthy parent Kuwait Petroleum Corp. (KPC) and the
shut-in, Middle East Oil & Gas (MEOG) under- MoO said in October would reach 3.5mn bpd by
stands that divisions within the Kuwaiti govern- 2025 and 4mn bpd a decade later, with the latter
ment and continuing discomfort regarding the target brought forward by five years.
key role played by Chevron in operations were As oil prices appear set to remain in the $80-
the key factors preventing a restart. 90 per barrel level amid geopolitical and supply
The US company’s concession for Wafra was concerns, the outlook for the PNZ is positive.
renewed by Saudi Arabia without first consulting This will be further supported by the decision
Kuwait. this week by OPEC+ to allow another 400,000
However, suggesting that the strained bpd to come on to the market from March.™

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