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Saudi, Kuwait in talks to resolve oil dispute – Kuwait expects oil prices to rise further

KUWAIT: Saudi Arabia and Kuwait have begun talks to resolve a dispute that halted oil production in the neutral zone between the Gulf neighbors, the Kuwaiti oil minister said. “A joint committee formed by the two countries... has recently held its first meeting in Riyadh,” the KUNA news agency quoted Ali Al-Omair as saying late Tuesday.

The dispute has seen the closure of the Khafji and Wafra oil fields in the neutral zone, which have been pumping for more than half a century. The two fields together produced more than 500,000 barrels per day which was equally shared between the two countries. Omair said there was no timeframe for the talks but that he expected a breakthrough shortly.

The offshore Khafji filed was shut down by the Saudi side in October over environmental issues. Wafra was closed in May for a two-week maintenance and did not resume production. Industry sources say Kuwaiti authorities were unhappy with Saudi Arabia for renewing an operating agreement for the Wafra field with Saudi Arabian Chevron for 30 years in 2009 without consulting them.

In response, it stopped issuing or renewing visas for Chevron foreign employees. The halt to output comes amid a worldwide supply glut that has driven down prices of crude. The dispute has been a blow particularly to Kuwait which, unlike its much larger neighbor, has little spare output capacity to compensate for drops in production.

Meanwhile, Kuwaiti Oil Minister Ali Al-Omair said oil prices are expected to extend a rebound - thanks to improved global growth, a drop in stockpiles and fewer drilling rigs. “We have reached a stage where a drop in oil prices is unlikely,” he said, cited by the official KUNA news agency on Tuesday night. The Organization of Petroleum Exporting Countries (OPEC), which earlier this month left its output target unchanged, has seen a decline in excess crude supply in the international market which will push prices up, Omair said. There has also been a drop in rig count and crude inventories, he added.

As a result of a production glut and a weak global economy, crude prices plummeted by more than 60 percent from June 2014 to January before recovering part of the losses. Oil prices extended their gains in Asia yesterday on expectations of a decline in US crude inventories and robust economic data from the euro-zone. US benchmark West Texas Intermediate for August delivery was up 12 cents at $61.13 a barrel and Brent climbed 11 cents to $64.56.

Omair said that the oil sector had requested additional funding of more than one billion dinars ($3.3 billion) for the Gulf state’s new refinery after bids by international consortia exceeded budget estimates. He said that the estimated cost of the 615,000-barrelper- day (bpd) Al-Zour refinery would now surpass 5.0 billion dinars ($16.5 billion), up from the initial cost of $13.2 billion. He said the new estimates would be presented to the Supreme Petroleum Council, the highest decisionmaking body on oil, to secure approval for the additional funds.

Together with the $12-billion project to upgrade two of the existing three refineries, Kuwait plans to raise its output of refined products to 1.4 million bpd from 930,000 bpd currently. Kuwait, a member of OPEC, pumps around 2.8 million barrels of oil a day. — Agencies

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This article was published on 24/06/2015