Kuwait has called on Saudi Arabia to resume production at a disputed border oil field, saying its neighbor will be held responsible for revenue losses, reports said Tuesday.
Kuwaiti Oil Minister Ali al-Omair told his Saudi counterpart Ali al-Naimi in a letter that the Saudi decision to halt production at Khafji violated a 50-year-old agreement. The move “will inflict heavy losses on Kuwait which will be borne by the Saudi government,” Kuwait’s Al-Rai newspaper quoted the letter as saying.
Production at the offshore Khafji oilfield, which pumped over 300,000 barrels per day and was jointly operated by the two countries, was halted in October. Kuwait said Saudi Arabia unilaterally stopped production due to pollution concerns even though it was entitled to five years’ notice under the joint agreement. Omair said that the Saudi halt violated a 1965 agreement to share output in the neutral zone between the Gulf neighbors, and also breached the joint operation deal signed in March 2010.
In May, work at another jointly operated oilfield in Wafra was halted for maintenance but never resumed. The two Gulf neighbors began talks in June to resolve the dispute.
Khafji is jointly operated by Kuwait Gulf Oil Co. (KGOC) and Saudi Aramco Gulf Operations, while Wafra is operated by KGOC and Saudi Arabian Chevron. 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 in the face of a worldwide supply glut that has driven down prices of crude. The dispute has been a blow to Kuwait which, unlike its much larger neighbor, has little spare output capacity to compensate for drops in production.