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UPDATE 3-Saudi, Kuwait to shut joint oilfield for maintenance
May 11, 2015 / 9:45 AM / 3 years ago

UPDATE 3-Saudi, Kuwait to shut joint oilfield for maintenance

(Adds Chevron comments)

By Rania El Gamal and Reem Shamseddine

DUBAI, May 11 (Reuters) - A jointly operated onshore oilfield between Saudi Arabia and Kuwait will shut for maintenance, a move apparently aimed at giving the Gulf OPEC allies more time to solve a long-standing dispute.

A Kuwaiti industry source told Reuters the scheduled two- weeks closure of the Wafra onshore oilfield, operated by a Saudi Arabian division of U.S. oil major Chevron, will start on Monday night or Tuesday.

“It is planned maintenance starting from tonight or tomorrow,” the source said, declining to be named because of the commercial sensitivity of the matter.

Production from the onshore fields in the Neutral Zone between Saudi Arabia and Kuwait was about 190,000 barrels per day, the source said.

Last month, Saudi Chevron told its partner, Kuwait Gulf Oil Company, that it planned to shut down Wafra after failing to resolve various disputes with Kuwait, mainly related to the right to operate, according to industry sources.

Chevron has said it has faced problems obtaining supplies and work permits for its expatriate staff, which could hurt production in the Neutral Zone.

“While efforts continue with all appropriate parties to resolve the issue, Saudi Arabian Chevron and Kuwait Gulf Oil Company are jointly undertaking maintenance shut down at the onshore Partitioned Zone,” Chevron spokeswoman Sally Jones said in an emailed statement on Monday.

The Kuwaiti source dismissed the idea that the disputes with Chevron were the reason for the shutdown.

LAND DISPUTE

The Neutral Zone is the only place in Saudi Arabia and Kuwait where foreign oil firms have equity in fields, which are otherwise owned and operated by state oil companies. Crude output is divided equally between the two countries.

It survived the nationalisation of the Saudi oil industry in the 1970s. Since then, Saudi reserves of 264 billion barrels, about a fifth of the world’s proven oil reserves, have been off limits to international oil companies.

Industry sources say Kuwait was angry because it was not consulted when the Chevron concession to operate Wafra was renewed by Riyadh in 2009 until 2039.

But the row goes back further to 2007, when a land dispute between Kuwait and Saudi Arabia led to a delay in Kuwait’s plans to build an oil refinery. Chevron has had a lease on some of the land on Kuwait’s side which was earmarked for the new refinery.

“I think (the maintenance shutdown news) is just to show and tell people there is nothing wrong so they came out with a decision that this has been taken by the two countries,” a Saudi industry source said.

“The purpose is to sit down and start resolving both issues at Wafra and Khafji.”

Another source in Saudi Arabia said: “It doesn’t look like there is a deal reached on Wafra as Chevron can’t operate there or get material or people in, so they are likely to shut it.”

The shutdown of Wafra, which has an output capacity of about 220,000 bpd of Arabian Heavy crude, comes after the oil output from another jointly operated field, Khafji, was stopped in October to comply with environmental regulations.

The move is unlikely to affect oil supplies from Saudi Arabia, the world’s top oil exporter, because of the kingdom’s significant crude output capacity, currently at 12.5 million barrels per day (bpd). In March, Saudi pumped 10.29 million bpd.

Kuwait’s production was about 2.86 million bpd in April, according to another industry source.

But it adds to a long list of disruptions in projects between the two neighbouring OPEC members, hampering oil and gas exploration and production from shared fields.

Kuwaiti and Saudi oil officials could not immediately be reached for comment. (Editing by Janet Lawrence and David Clarke)

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