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Al-Falih Sees Saudi-Kuwait Deal To Resume Neutral Zone Oil Output This Year

Saudi Arabia expects that it can reach a deal with Kuwait to resume oil production from joint oil fields in the so-called Neutral Zone this year, Saudi Arabia’s Energy Minister Khalid al-Falih said on Wednesday.

“We hope in 2019 it will be resolved,” Reuters quoted al-Falih as saying a day after meeting with the Emir of Kuwait, Sheikh Sabah al-Ahmad al-Jaber al-Sabah.

The so-called Partitioned Neutral Zone (PNZ) was established between Saudi Arabia and Kuwait in 1922 to settle a territorial dispute between the two countries. As of 2015, the oil production capacity in the neutral zone stood at 600,000 bpd, equally divided between Kuwait and Saudi Arabia, according to the EIA. Production from the zone averaged around 500,000 bpd just before the shutdown of the two oil fields, Khafji and Wafra, in 2014-2015.

As of October 2018, operational divergences and geopolitical divisions were still preventing Saudi Arabia and Kuwait from making any progress in talks about the potential restart of the jointly operated oil fields that analysts were hoping could soon add 500,000 bpd of oil production in the Middle East.

A few weeks before that, at the end of September 2018, Saudi Arabia’s Crown Prince Mohammed bin Salman discussed the restart of crude oil production in the neutral zone during a meeting with Kuwait’s Emir. The Saudi Crown Prince’s visit to Kuwait, however, was cut short, while big divergences between the two sides remained.

In December 2018, The Wall Street Journal reported that Saudi Arabia and Kuwait were inching closer to restarting oil production in the Neutral

Zone after the United States had intervened to broker a deal between the two countries. Production could restart in the first quarter this year, the Journal reported two months ago, citing oil officials familiar with the negotiations. The resumption of production from those fields and the potential adding of 500,000 bpd production capacity in the Middle East could alleviate concerns about tightening supply as the U.S. mulls over phasing out the waivers it had granted to key Iranian oil buyers, according to The Journal.

By Tsvetana Paraskova for Oilprice.com

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