Companies to bid for Kuwait divided zone contract

MEED    28 February 2020 (Last Updated February 28th, 2020 16:42)

Companies to bid for Kuwait divided zone contract

Contractors are preparing to bid for a five-year contract with state-owned Kuwait Gulf Oil Company (KGOC).

KGOC is a subsidiary of Kuwait Petroleum Corporation (KPC) and manages Kuwait’s share of the natural resources in the Divided Zone, which is shared by Saudi Arabia and Kuwait and is also referred to as the Neutral Zone.

KGOC was founded in 2002 and started to take over the operations in the Divided Zone from Kuwait Oil Company in 2006.

The contract is expected to be worth less than $100m, according to industry sources. Its scope includes consulting, engineering and manpower for projects at the Wafra oil field.

The deadline for bid submission is 9 March.

One source said: “We’re not expecting the value of this contract to exceed $100m.

“Wafra doesn’t have a lot of facilities. It has upstream facilities, which are small at the moment, although there are plans to expand them.”

Earlier this month, Wafra Joint Operations Company, a Saudi-Kuwaiti joint venture that operates in the Divided zone, restarted oil production activity from the onshore Wafra field.

In a memorandum sent to joint operations’ managers, auditors, superintendents and other team leaders on 13 February, Wafra Joint Operations Company said it was set to restart oil output works from the Wafra field from 16 February.

Wafra Joint Operations Company is equally owned by KGOC and US energy company Chevron, operating the Neutral Zone concession on behalf of Saudi Arabia.

The resumption of oil output from Wafra is a major development since the resolution of the dispute between Saudi Arabia and Kuwait that lasted for nearly five years.

The dispute had halted production activity in the Divided Zone since the last quarter of 2014.

Oil production from the Saudi-Kuwait Neutral Zone, a hydrocarbons-rich area divided equally between the two countries, stood at between 500,000 barrels per day (bpd) and 600,000bpd, before operations ground to a halt.

Both the Wafra oilfield and the offshore Khafji field are located in the region.

Production from the Khafji field stopped in October 2014, while Wafra went offline in May 2015 over territorial issues between the two countries dating back to the 1920s, and particularly over Kuwait’s displeasure at Riyadh renewing Chevron’s concession agreement until 2039.

The political leadership of Saudi Arabia and Kuwait had been working throughout 2019 to resolve their dispute and restart oil production from the Neutral Zone.

Saudi Energy Minister Prince Abdulaziz bin Salman and Kuwaiti Foreign Minister Sheikh Ahmad Nasser al-Mohammad al-Sabah, signed agreements to resolve the Neutral Zone dispute in December, according to a statement released on Kuwaiti state news agency, Kuna.

At the time, Chevron said it expects production from the Khafji and Wafra fields to return to full output capacity in 12 months’ time.

In January, MEED reported that KGOC and Chevron have been in consultations with contractors about the potential construction of a gas sweetening facility in the Divided Zone.

While output has resumed at Wafra, it remains to be seen how soon the Divided Zone joint venture can resume production from the offshore Khafji field.

This article is published by MEED, the world’s leading source of business intelligence about the Middle East. MEED provides exclusive news, data and analysis on the Middle East every day. For access to MEED’s Middle East business intelligence, subscribe here.