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Kuwait expects its share of the oil production from the Neutral Zone that it shares with Saudi Arabia to be 250,000 bpd by the end of 2020 when production will have resumed after half a decade of hiatus because of a dispute.
At the end of 2019, neighbors Saudi Arabia and Kuwait reached an agreement to resume oil production from the two oilfields they share in the Neutral Zone.
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.
Operational differences and a worsening in bilateral relations led to the suspension of production back in 2015. The worsening came as Saudi Arabia renewed Chevron’s concession for Wafra. According to the Kuwaiti side, Riyadh did that without consulting it.
The two neighbors now have agreed to restart the two oilfields, which could put an additional 500,000 bpd-600,000 bpd on the oil market.
“Signing the Memorandum of Understanding means the return of production of 250,000 bpd...before the end of 2020,” Reuters quoted Kuwait’s Oil Minister Khaled al-Fadhel as telling Parliament on Thursday.
According to the minister, the 250,000-bpd additional production capacity from the shared Neutral Zone will not impact Kuwait’s compliance with the ongoing OPEC+ production cuts. OPEC and its Russia-led allies are set to review the current pact in March this year.
Kuwait has been strictly complying with its share of the cuts, while Saudi Arabia has been going the extra mile every month and has cut much more than it had promised to.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.