Optimism for an imminent agreement between Kuwait and Saudi Arabia to return oil production in the divided region

Nadia Al Dabbas - Kuwait

Consecutive statements made over the past two days reinforced optimism that there is a consensus between the two sides on the resumption of oil production in the divided region, which stopped nearly five years ago.

This optimism was heightened by a statement by Kuwaiti Speaker of the National Assembly Marzouq Al-Ghanim, and raised hopes that a final agreement between the two countries would be signed soon.

Kuwaiti - Saudi consensus
Al-Ghanim announced a Kuwaiti-Saudi agreement to resume production, describing it as "reflecting the depth of the distinguished relationship between the two brotherly and neighboring countries."

He added, "This is how things are resolved between the brothers, and it was done as it should be between Kuwait and Saudi Arabia."

Al-Ghanim's remarks came a day after assurances by Kuwaiti Deputy Foreign Minister Khaled al-Jarallah that negotiations between the two sides were still going on and that the atmosphere under which they were being held was "very positive", but stressed that the two countries would start talking about the return of oil production when Final agreement on the divided area.

Kuwaiti newspapers reported that the meetings of the Kuwaiti delegation, which went to Saudi Arabia last Thursday, resulted in the signing of a protocol of agreement in principle to resume production in the divided region, with a final agreement to be reached soon after finalizing it.

Return production
According to Kuwaiti newspapers quoted sources described as high-level, will be examined and tested wells and rehabilitated to return production gradually, indicating that the production in the field of Khafji will return once the completion of some protocol procedures between the two countries and some items on the environmental side, as for the field of abundance, production will return Within three months, the period required to operate the field.

The divided area covers an area of ​​5,770 square kilometers on the border between the two countries.

He explained the oil expert Abdul Hamid Al-Awadi to the island Net that the suspension of production from the fields of Khafji and Wafra joint deprived the oil market of daily production of 550 thousand barrels, and thus resulted in losses estimated at about $ 40 billion between Kuwait and Saudi Arabia.

"In the event of a return to production, Kuwait will achieve daily revenues estimated at 16.5 million dollars through its share of 275 thousand barrels."

The Khafji field is operated by Saudi Aramco and Kuwait's Gulf Oil Company, a Kuwaiti government affiliate, before the Saudi side moved to close the field in October 2014 for environmental reasons, it was announced at the time.

Wafra is operated by Kuwait Gulf Oil Company and Chevron International on behalf of Saudi Arabia and has been closed since May 2015 due to operational problems.

Document the agreement
Al-Awadi believes that the recent attack on some Saudi Aramco facilities was one of the reasons that accelerated the negotiations between the two countries to benefit from the oil of this region, in addition to the events taking place in Venezuela, in addition to depriving the market of Iranian oil because of the sanctions.

Kuwaiti oil expert Kamel al-Harami, in his view, opposes Al-Awadi saying that Aramco has regained production capacity within ten days, a time, pointing to the existence of saturation in the oil markets.

Al-Harami spoke to Al-Jazeera Net about what some Kuwaiti newspapers wrote that the final agreement will be documented at the United Nations, considering it a good thing as it will preserve the rights of both parties and thus prevent the recurrence of differences between them in the future.

From Harami's point of view, the disruption of oil production in the divided region was more of a sovereign dispute over Kuwait than it was argued for environmental reasons.

Reasons for suspension of production
Economic analyst Dr. Hajjaj Boukhdour believed that the suspension of production is behind technical differences and not political, explaining that this is represented by a disparity in capabilities between the Kuwaiti and Saudi sides.

In his speech to Al Jazeera Net, Boukhdour summarizes this disparity in capabilities in three axes:

The first relates to the company that ran the production management process. Saudi Arabia has adopted a system of outsourcing projects to international companies directly without the need for a local agent, while Kuwait adheres to the local agent's requirement.

The second issue concerns the divergence in the administrative philosophy between Aramco and KPC, which requires a unified formula between the two sides.

The third problem is confined to Boukhdour's security and safety requirements in accordance with international standards, where it needs preparations that did not exist during the cessation of production, including requirements to interfere with the quality of the product, whether oil or petrochemical derivatives to increase its value and easy to market.

According to Boukhdour, the draft agreement exists mainly between the two countries, but what remains is to agree on implementation mechanisms to start production.