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Work at an oilfield run by both Kuwait and Saudi Arabia was suspended on May 11, ostensibly for maintenance, but the project remains closed to allow the two countries to resolve a persistent dispute reportedly over operational rights.
Ali al-Omair, Kuwait’s oil minister, during an official visit to the Qatari capital of Doha on May 13, announced the shutdown of the onshore al-Wafra field, which is situated in the Saudi-Kuwait Neutral Zone between the two countries. He said work had been suspended two days earlier.
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At that time, al-Omair cited maintenance as the reason for the closure, and that a decision on resuming work at al-Wafra would be made when the maintenance was complete, on May 25. But two days after that, Saudi Arabian Chevron, a subsidiary of the U.S. oil major Chevron, said the shutdown would continue until operational difficulties are worked out.
“Current difficulties in securing work permits and materials have impacted the company’s operations,” Chevron spokeswoman Sally Jones said in a statement. “While efforts continue with all appropriate parties to resolve the issue, Saudi Arabian Chevron and Kuwait Gulf Oil Co. have stopped production at the onshore partitioned zone. Production will remain shut in until the situation is resolved.”
Jones’s statement said the company has had trouble getting supplies and work permits for its foreign staff, which interferes with production in the neutral zone, the only place in either country where foreign energy companies are allowed to operate. Energy fields in each country outside of the neutral zone are exploited by their respective state energy firms.
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The al-Wafra field has a potential output of about 250,000 barrels of oil per day, but in February it was only producing 180,000 barrels per day, according to two knowledgeable sources cited by Bloomberg. They pointed to a lack of manpower, saying Kuwait’s government stopped issuing or renewing permits for workers at al-Wafra in 2014.
Under a Kuwait-Saudi agreement, output from al-Wafra is divided equally between the two countries. Al-Umair said he hoped maintenance at al-Wafra would help the Kuwait Petroleum Corp.’s goal of reaching oil overall output of 4 million barrels per day.
The dispute between Kuwait and Saudi Arabia is nearly a decade old. In 2007 the two countries became engaged in a land dispute over Kuwait’s plans to have Chevron build an oil refinery in the neutral zone. The site of the refinery was on land in the Kuwait side of the neutral zone that had been leased to the U.S. energy company.
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Kuwait also is angry with Saudi Arabia because in 2009 Riyadh had renewed Chevron’s concession to run the al-Wafra operation for 30 more years without first consulting Kuwait, according to anonymous officials in the oil industry in Kuwait quoted by Reuters.
“I don’t think you will see any change of the status quo until the end of the third quarter [as] people from Chevron will keep leaving the country because of the expiration of their visas,” one of these sources told the news agency.
By Andy Tully of Oilprice.com
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Andy Tully is a veteran news reporter who is now the news editor for Oilprice.com