Oil industry awaits end to Neutral Zone stalemate

1 November 2018 (Last Updated November 1st, 2018 11:31)

Saudi Arabia’s Crown Prince Mohammed bin Salman has indicated his government could soon reach a deal with Kuwait to resolve their Neutral Zone territorial dispute, which has caused oil production in the hydrocarbons-rich area to halt.

Oil industry awaits end to Neutral Zone stalemate
A Saudi delegation, led by Prince Mohammed and including energy minister Khalid al-Falih, visited Kuwait in early October to address challenges relating to operations in the Neutral Zone. Credit: Courtesy of Kremlin.ru

Saudi Arabia’s Crown Prince Mohammed bin Salman has indicated his government could soon reach a deal with Kuwait to resolve their Neutral Zone territorial dispute, which has caused oil production in the hydrocarbons-rich area to halt.

Production at the Khafji and Wafra oil fields, which Saudi Arabia and Kuwait are meant to share, stopped in October 2014 and May 2015 respectively, apparently due to technical problems.

It is widely understood, however, that long-standing sovereignty issues between the two countries caused production to cease.

A Saudi delegation, led by Prince Mohammed and including energy minister Khalid al-Falih, visited Kuwait in early October to address challenges relating to operations in the Neutral Zone.

This is good news for the regional industry, particularly for players such as US energy company Chevron, who are a key operator in the area.

The resumption of production from the Neutral Zone could lead to the revival of stalled projects worth billions of dollars, greatly benefitting contractors.

Restarting operations in the zone would also add to the spare production capacities of both these key Opec members, at a time when there is pressure to raise output and drive down crude prices.

Riyadh is keen for production in the Neutral Zone to resume as soon as possible, while allowing sovereignty matters to be ironed out at a governmental level. The return of stakeholders to work in the area may be just a matter of time.

This article is sourced from Offshore Technology sister publication www.meed.com, a leading source of high-value business intelligence and economic analysis about the Middle East and North Africa. To access more MEED content register for the 30-day Free Guest User Programme.

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