DUBAI Dec 4 Saudi Arabia and Kuwait are
expected to agree this month to resume oil production from the
jointly operated oilfields in the Neutral Zone that lies between
both countries, industry sources told Reuters on Sunday.
The closure of the Neutral Zone's fields, mainly Khafji and
Wafra, has become a political sticking point between the two
Gulf OPEC allies and senior officials have been trying to
resolve the issue for months.
Khafji was shut in October 2014 for environmental reasons
and Wafra has been shut since May 2015 due to operating
The restart would come at a sensitive time for the oil
markets after OPEC agreed last week to reduce output by around
1.2 million barrels per day (bpd) from January in a bid to
reduce global oversupply and prop up prices.
A resumption of production from the joint oilfields would
not be immediate and would be gradual, industry sources said.
"It will take some time," said one industry source, adding
that the decision to restart the fields was likely to be made in
"The Saudis are telling Kuwait they can restart the Neutral
Zone, so potentially another 300,000 bpd of crude come
on in late Q1 of 2017, or early Q2 2017. Al-Khafji Joint
Operations has been told to prepare a startup readiness report,"
said another industry source.
The Khafji field had been producing 280,000 to 300,000
barrels per day (bpd) until its closure.
It is operated by Al-Khafji Joint Operations Co, a joint
venture between Kuwait Gulf Oil Company and AGOC, a subsidiary
of state oil firm Saudi Aramco.
The Wafra field has an output capacity of about 220,000 bpd
of Arabian Heavy crude. U.S. oil major Chevron operates
the field on behalf of the Saudi government.
Saudi Arabia's Energy Minister Khalid al-Falih was in Kuwait
in early November for talks over the issue with his Kuwaiti
counterpart, sources familiar with the matter said.
King Salman was expected to visit Kuwait later this week,
and the Neutral Zone issue was likely to be discussed during
that visit, the sources said.
Kuwait has limited spare production capacity and has
therefore been hit harder than Saudi Arabia by the closures.
Kuwait's production capacity is estimated at 3.2 million bpd,
compared to Saudi Arabia's 12 million bpd.
The Neutral Zone is the only place in Saudi Arabia and
Kuwait where foreign oil firms have equity in fields, which are
otherwise owned and operated by state oil companies. Crude
output is divided equally between the two countries.
(Reporting by Rania El Gamal and Ron Bousso; Editing by Jason
Neely and Alexandra Hudson)