Land rigs/Bloomberg


Saudi Arabia and Kuwait make breakthrough in neutral zone oil talks

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The neutral zone has not produced anything since fields there were shut down after spats between the two countries in 2014 and 2015.

Thursday 04, July 2019

Saudi Arabia and Kuwait are close to commencing oil production from the neutral zone shared by the neighbouring nations after making a breakthrough in recent talks, reported Bloomberg.

While the duo has not yet reached a final agreement, in a recent meeting the Middle East nations made significant progress in resolving sovereignty issues that have thwarted negotiations in the past.

The strip of desert straddling Saudi Arabia and Kuwait can pump about 500,000 barrels a day, as much as OPEC-member Ecuador.

Following a meeting in Riyadh last month, both sides are said to be drafting new documents ahead of further talks and the next meeting is expected to be held in Kuwait this month.

Production will be able to resume from the fields of Khafji and Wafra once Saudi Arabia and Kuwait finalise some technical details.

Still, it’s not clear whether the neutral zone will pump much oil immediately even if both nations reach a final deal because the Organisation of Petroleum Exporting Countries extended its production cuts into early 2020. Saudi Arabia and Kuwait split the crude pumped from the neutral zone within their respective OPEC production quotas.

The two Gulf nations have held several private meetings since 2015, at one point even coming close to signing an agreement before pulling back at the last minute over wording in the final documents regarding contentious sovereignty issues.

The neutral zone spread over 5,700 km—an area a bit smaller than Delaware—was created by a 1922 treaty between Kuwait and Saudi Arabia. In the 1970s the two nations agreed to divide the area and incorporate each half into their territory, while still sharing and jointly managing the petroleum riches. The region contains two main oil fields the onshore Wafra and the offshore Khafji.

The disagreement between Saudi Arabia and Kuwait started on the Wafra field, which is operated by Chevron when Saudi Arabia extended the original 60-year-old concession of the field without consulting Kuwait.

TAGS : OPEC production quotas, Chevron, Khafji, Wafra, Oil production

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