Saudi and Kuwait Sign Joint Oil Production Agreement

Saudi Arabia and Kuwait on Tuesday (24/12) signed an agreement to resume operations of two large oil fields in the neutral zone that had been closed for five years due to bilateral disagreements, officials said.

Kuwaiti Oil Minister Khaled al-Fadhel on Twitter said the memorandum of understanding signed with Saudi Arabia included “the resumption of production in a divided zone.”

Kuwaiti state news agency KUNA reported the two countries also signed an agreement on demarcation of land and maritime borders in neutral zones.

KUNA did not detail the contents of the deal that likely changed the previous border agreement between the two Arab countries.

The two oil fields pumped about 500,000 barrels of crude per day before production was halted – first in Khafji in October 2014 and in Wafra seven months later, due to disputes between the two neighboring countries.

Saudi Arabia at the time said the closure decision was due to environmental concerns.

Oil produced in neutral zones in the border region is divided equally between the two countries.

Khafji, an offshore oil field, is jointly operated by Kuwait Gulf Oil Co. (KGOC) and Saudi Aramco Gulf Operations, while onshore oil field Wafra is operated by KGOC and Saudi Arabian Chevron.

Kuwait blames Saudi Arabia for unilaterally halting production at Khafji and says Kuwait is entitled to five years’ notice under a joint agreement signed in 1965.

The two countries have been negotiating to resolve the dispute and resume production, since June 2015.

The talks prompted Kuwait’s Emir Sheikh Sabah al-Ahmad Al-Sabah to visit Riyadh and saudi Arabia’s Crown Prince Mohammed bin Salman to visit Kuwait city.

Tuesday’s deal comes at a time when oil prices are under pressure due to a glut of reserves and weakening global economic growth.

Continued weakening prices are causing OPEC and its allies to cut production further starting next month.

OPEC kingpin Saudi Arabia pumps a little under 10 million barrels per day, while Kuwait produces about 2.7 million barrels per day.

Leave a Reply

Your email address will not be published. Required fields are marked *