To compensate the loss of 250,000 barrels per day due to a dispute with Saudi Arabia over neutral zone production, Kuwait is looking at alternative oilfields to raise oil production. Jamal Al-Loughani, head of marketing at Kuwait Petroleum Corps stated that Kuwait Oil Company is trying its best to concentrate on high production fields, and to dig more wells in a bid to compensate for the loss in the neutral zone production.
The loss of production comes after the closure of the neutral zone Khafji and Wafra oilfields following a dispute with neighboring Saudi Arabia. Loughani assured that KPC has an ambitious plan to raise output by the end of the year to the level before the stoppage. The two fields together pumped more than 500,000 bpd which was equally shared between the Gulf neighbors. Kuwait has been pumping around 2.9 million bpd for several months. Khafji was shut down by the Saudi side in October over environmental issues and Wafra was closed last week for two-week maintenance. Sources said production will not resume before the dispute is resolved.
Unlike its much larger neighbor, Kuwait has little spare output capacity to compensate and the country has taken a serious blow due to the halt which comes amid a worldwide supply glut that has driven down the prices of crude. According to a local Kuwaiti daily, Kuwait has requested arbitration in the dispute. Industry sources say Kuwaiti authorities were unhappy with Saudi Arabia for renewing an agreement with Saudi Arabian Chevron for 30 years in 2009 without discussing the issue to them. In response, it has stopped issuing or renewing visas for Chevron employees.
Meanwhile, Kuwait’s governor at OPEC Nawal Al-Fuzai mentioned that oil prices could continue to rebound in the second half of 2015 following signs of growth in demand and a drop in high-cost production. “It is expected that a kind of a balance will exist in the oil market in the second half of 2015 which will support prices,” she said to reporters. “Prices are improving, growth in supplies from outside OPEC - especially shale oil - is lower than before and demand is recovering,” she added.
This has pushed both the Organization of Petroleum Exporting Countries and the International Energy Agency to adjust upward their forecasts for crude demand, Al-Fuzai interjected, then said that it was too early to predict the decision OPEC will take at its meeting next month.
The 12-member cartel decided in November not to cut output, a decision that saw crude prices dive 60 percent before starting to rebound. Oil prices have climbed about 40 percent in the past few weeks, but remain well below their levels of more than $100 a barrel in June last year.
OPEC’s decision aimed to curtail the fast-growing shale oil sector in the United States, and has so far succeeded in curbing supplies from high cost producers and supported prices, Al-Fuzai said. She also mentioned that in her view oil prices will not drop this year barring any major events, such as a sudden and unexpected slide in demand. However, there was the possibility that the expected deal between Iran, a member of OPEC, and Western powers over the Islamic republic’s nuclear program could force added pressure on oil prices despite Tehran being unlikely to resume exports soon.
Al-Fuzai said there has been a large drop in the surplus supplies of crude oil on the market from around 2 million barrels per day late last year to between 1-1.2 million now. She added that a meeting of technical experts from OPEC and non-OPEC conventional producers was held this month but there has been no conclusion reached.
As a result of fresh tensions in Yemen and Iraq, oil prices rose in Asia yesterday as concerns were raised about a supply disruption in the crude-rich Middle East. US benchmark West Texas Intermediate for June delivery gained 21 cents to $59.90 while Brent crude for July rose 18 cents to $66.99 in afternoon trade. Analysts say however that any gains in oil prices are being plugged by persistent concerns over a global oversupply in the face of weaker demand.