Oil production from the divided region between Saudi Arabia and Kuwait has stalled as relations deteriorate[/ltr]
[ltr][rtl]Release date: 2018/10/17 18:02[/rtl] • [rtl]234 times read[/rtl][/ltr]
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Saudi Arabia and Kuwait will find it difficult to resume oil production from two jointly run fields soon because of disagreements over operations and deteriorating political ties between the two Gulf OPEC allies, well-informed sources said.
The two countries stopped production from Khafji and Al-Wafra fields in the divided region more than three years ago, cutting about 500,000 bpd, equivalent to 0.5 percent of the world's oil supply.
As oil prices soar to a four-year high above $ 85 a barrel this year, Washington is pressing Riyadh, its biggest ally in the Gulf, to cut oil prices by increasing production.
Crown Prince Mohammed bin Salman visited Kuwait last month to discuss resuming oil production from the region.
But the sources, who asked not to be identified because they were not authorized to discuss the matter publicly, said the talks failed to get closer to the two countries than to reach an agreement with the resistance of Kuwait pressure Riyadh to strengthen control of the two fields.
"It did not go well because Kuwaiti sovereignty is not negotiable," one source said.
He added that Riyadh did not want to apply the Kuwaiti laws on the large US oil company Chevron, which works in the field of land on behalf of the Saudi government.
Another source said Saudi Arabia wanted to have a decision and greater control over the management of oil operations in the region.
The sources said that Prince Mohammed met with the Amir of Kuwait Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah and Crown Prince Nawaf Al-Ahmad Al-Jaber Al-Sabah, but the visit was shortened to a few hours on the night of 30 September compared to two days as originally planned.
The tensions between the two countries over a ban on Qatar and differences of views on relations with Iran, Saudi Arabia's arch-rival, have fueled political row, sources say. Kuwait is seeking to mediate in the Saudi-led province of the United Arab Emirates.
Saudi Arabia, Bahrain, the United Arab Emirates and Egypt cut diplomatic ties, transport links and trade with Doha last year, accusing Qatar of funding terrorism, charges Doha rejects.
Kuwait has sought to remain neutral, but the prince's efforts to mediate the dispute have not been successful so far.
Kuwait, which has a large Shiite minority, has maintained open lines of dialogue with Iran. Saudi Arabia and Iran support opposing parties in Syria and Yemen.
In a move that may complicate relations with Riyadh more, Kuwait this month signed a defense cooperation plan with Turkey in what was said to be aimed at strengthening bilateral ties.
Turkey supports Qatar in the Gulf dispute and has strained relations with Riyadh because of Ankara's close ties with Iran.
"The [regional] situation does not bode well for stability," said Saleh Ashour, a member of Kuwait's parliament. "Every country must think about how to protect itself."
Off fields are expensive
Dividing oil production in the divided region, which dates back to agreements reached in the 1920s, established regional borders equally between Saudi Arabia and Kuwait.
Wafra is the Kuwait-operated Gulf Oil Company and Chevron on behalf of Saudi Arabia. The Khafji field is run by Saudi oil giant Saudi Aramco and Kuwait Gulf Oil Company.
Tensions have been brewing since last decade, when Kuwait was angered by a Saudi decision to extend Chevron's concession in the Wafra field until 2039 without consulting Kuwait.
Saudi Arabia closed the Khafji field in 2014 due to environmental problems. In 2015, Chevron closed the Wafra field after failing to agree on operating rights with Kuwait.
According to sources familiar with the field operations, the suspension of production is costly because of the need to invest tens of millions of dollars annually for maintenance work.
One source said the divided area "is the largest single origin in the world that has been deliberately stopped and is no longer productive for three years."
"The longer the resumption of production, the greater the cost of maintenance. "The most complicated thing is probably a quick and complete resumption of the two fields."
Industry sources from the two countries say that although Khafji and Al Wafra are geographically unrelated, agreement on resuming production in one of them will be linked to the other.