Aug.
2001 Vol. 222 No. 8 International Outlook
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MIDDLE EAST
Dr. A. F. Alhajji, Contributing Editor,
Boulder, Colorado
Neutral Zone
Kuwait shares this 6,200 sq-mi area and its oil
revenues with Saudi Arabia. A subsidiary of Saudi Aramco, Aramco Gulf Operations Co. (AGOC), took over the
concession of Japans Arabian Oil Co. (AOC) after it expired and negotiations broke down in February 2000
between the Kingdom and the Japanese firm. Since that time, observers have watched closely the fate of AOC in
the Kuwaiti half of the Neutral Zone.
AOC held its first formal meeting with Kuwait last
June, to negotiate a renewal of the contract that was set to expire at the beginning of 2003. This followed
two informal meetings with a special negotiating committee headed by Kuwaits oil minister, Adel
al-Subeih. However, the government hinted during these negotiations that it was looking for other alternatives
and had asked national oil company, KPC, to prepare to take over operations if negotiations break down.
Observers predicted more flexibility by AOC after its loss of the Saudi concession.
Early in July, Kuwait agreed to renew AOCs
contract under new terms. It will extend drilling rights on the Kuwaiti side of Khafji oil field. Officials
from both countries will sign the contract in September. Kuwaiti sources indicated that the agreement includes
provisions to increase Japanese investment in Kuwait. In addition, AOC will develop the untapped Dorra gas
field. The latter was made possible by last years border demarcation between Saudi Arabia and Kuwait.
Drilling / development. Drilling increased to
40 wells after a decline in 1999 that was due to lower oil prices and tedious negotiations over AOCs
concession renewal. The number of wells drilled in 2001 is expected to increase 13%. However, drilling
activity is expected to boom in 2002.
A producing well blew out in January, in the Kuwaiti
portion of the Neutral Zone. The S-127 well in Wafra field (operated by Texaco) blew out during a workover and
has been suspended until insurance assessments of the damage are made. Experts believe that extensive
overproduction from the field led to the gas blowout.
Production. Oil output has been increasing for
the last four years. Production gained 7%, averaging 630,000 bopd.
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