Nigeria and other Organisation of Petroleum producing Countries (OPEC) face another major quest to defend oil prices by increasing oil supply as Kuwait said it’s expecting new 250,000 barrels bpd from a so-called Neutral Zone before the end of this year.
The announcement comes as 2020 outlook for oil prices have come under pressure due to abundant reserves and weak global economic growth which has prompted Organisation Petroleum Exporting Countries (OPEC) and its allies to make deeper production cuts starting this month.
Kuwait’s have boasted that it’s expecting another 250,000 BPD from oil fields from a Neutral Zone shared with Saudi Arabia. The two neighbours have now agreed to restart the two oilfields, which could put an additional 500,000 bpd-600,000 bpd on the oil market.
The news about oil production from the two fields will be a huge concern for OPEC and its allies who now face a dilemma on whether to include or exclude the neutral zone which was previously exempted from production cuts.
“Signing the Memorandum of Understanding means the return of production of 250,000 bpd…before the end of 2020,” Kuwait oil minister Khaled al-Fadhel, said in a parliament session quoted by Reuters.
Saudi Arabia and Kuwait both agreed last year to resume production at two major oilfields in a shared neutral zone after five years of stoppage. The two fields were pumping some 500,000 barrels per day before production was halted first at Khafji in October 2014 and then at Wafra months later over a dispute between the two Arab Gulf neighbours.
Khafji was jointly operated by KGOC and Saudi Aramco Gulf Operations, while Wafra was operated by KGOC and Saudi Arabian Chevron.
“The Neutral Zone agreement will also enable Kuwait to develop its share of the Dorra gas field in the Neutral Zone to produce 500 million cubic feet of natural gas per day and increase the country’s natural gas and crude oil reserves,” said al-Fadhel.
Saudi Arabia pumps just under 10 million bpd, while Kuwait produces around 2.7 million bpd.
The news about oil production from the two fields will be a huge concern for OPEC and its allies who now faces a dilemma on either to include or exclude neutral zone which was previously exempted from production cuts.
According to a source who spoke to Bloomberg, the resumption of oil production from Khafji and Wafra will not add to global supply because both Kuwait and Saudi Arabia complies with their production quota under the OPEC+ agreement.
Even so, any news about the restart of the neutral zone fields would punish oil prices as all reports so far have said.
