Oil output from shared Neutral Zone remains on hold

KUWAIT: A general view of Kuwait Towers and the Arabian Gulf Road seen from Kuwait City. – Photo by Abdullah Al-Mohareb (KUNA)

KUWAIT: Kuwait has advanced to the 54th position in the annual report of the 2018 Global Competitiveness Index, published by the World Economic Forum (WEF), the finance ministry said yesterday. The report, which placed Kuwait first in macroeconomic stability, reflected the country’s improved place in 47 out of 90 indexes in different sectors, the ministry said in a press release. It showed Kuwait’s improvement in the indexes of judicial independence, press freedom and reduction of burdens of government regulations that negatively affect economic competitiveness, it added.

The report also indicated improved services in transportation, road quality, air transport infrastructure, labor, wages and production, according to the statement. Kuwait’s advanced rank also included pillars of institutions, such as the reduction of burdens of government regulation, protection of intellectual property and legal environment efficiency, it said. Also involved are staff training, vocational training quality, education output skills and digital technology skills, it indicated. The WEF Global Competitiveness Index report is a key index to gauge service improvement in various sectors. It is the 14th time for Kuwait to be included in the report, which measures the competitiveness of 140 countries.

Separately, Saudi Arabia and Kuwait will struggle to resume oil production from jointly operated fields anytime soon due to operational differences between the Gulf OPEC allies, sources familiar with the matter said. The two countries halted output from the jointly run oilfields – Khafji and Wafra – in the so-called Neutral Zone more than three years ago, cutting some 500,000 barrels per day or 0.5 percent of global oil supply. As oil prices rose to a four-year high above $85 per barrel this year, Washington has been pressing its top Gulf ally Riyadh to reduce crude prices by increasing production.

Riyadh does not want Kuwaiti laws to apply to US oil major Chevron, which operates the Wafra onshore field on behalf of the Saudi government, a source said. Another source said Saudi Arabia wanted a bigger say and more control in running oil operations in the zone. “The (regional) situation is not stable, so every country should think how to protect itself,” Saleh Ashour, a member of the Kuwaiti parliament, told Reuters.

Oil output in the Neutral Zone, which dates back to 1920s treaties establishing regional borders, is divided equally between Saudi Arabia and Kuwait. The Wafra field is operated by state-run Kuwait Gulf Oil Co and Chevron on behalf of Saudi Arabia. The Khafji field is operated by state oil giant Saudi Aramco and Kuwait Gulf Oil. Tensions have been simmering since the last decade, when Kuwait was angered by a Saudi decision to prolong Chevron’s Wafra concession until 2039 without consulting Kuwait. In 2014, Saudi Arabia closed Khafji, citing environmental issues. In 2015, Chevron shut Wafra after failing to agree operating rights with Kuwait.

Shutting output is expensive because it requires investments of tens of millions of dollars per year for maintenance, sources familiar with field operations said. The Neutral Zone “is the single biggest asset in the world which was deliberately stopped and hasn’t been producing for three years”, one of the sources said. “The more the restart is postponed the more it will cost to maintain it. And the more problematic it might be to restart the fields quickly and fully,” he added. Industry sources from both countries say that though Khafji and Wafra are not linked geographically, an agreement to bring one field back online would be tied to the other. – Agencies