Kuwait commissions ‘onshore’ PNZ study

Bid to meet national target

KUWAIT CITY, April 11: Kuwait Gulf Oil Company, (KGOC), a subsidiary of state-owned Kuwait Petroleum Corporation (KPC), has awarded a contract to the French company CGG for carrying out a multiyear geoscientific study to identify resource growth potential in the onshore partitioned zone between Kuwait and Saudi Arabia, reports Your Industry News.

Two years ago, oil production in this partitioned zone of area 5,000 square meters between Kuwait and Saudi Arabia located near Al-Zour in southern part of Kuwait, known as Partitioned Neutral Zone (PNZ), was suspended following a dispute between Kuwait and Chevron, the US Company that operates Saudi’s onshore portion of the zone.

Kuwait Gulf Oil Company has a 50 percent share in the onshore and offshore portions. It shares onshore operatorship with Chevron and offshore operatorship with Aramco Gulf Operations Company, a subsidiary of Riyadh-owned Saudi Aramco.

Wafra heavy oilfield, the only producing onshore field which contains heavy oil reserves estimated at around 25 billion barrels, and also consists of the undeveloped South Umm Ghudair, South Fuwaris, Humma and ARQ fields, was yielding around 220,000 barrels per day when Chevron decided to suspend operations in May 2015, accusing the Kuwaiti government of obstructing the company’s work.

Aggrieved

The Kuwaiti government was reportedly aggrieved by Riyadh’s renewal of the concession agreement with Chevron in 2009, allegedly without the requisite level of consultation.

However, throughout last year, Kuwaiti officials repeatedly affirmed that restarting oil production in PNZ was imminent. In December 2016, Kuwait’s Minister of Oil Essam Al-Marzouq said the machinery at the PNZ fields was being readied for a resumption order.

In this regard, Chevron indicated in its annual report in February 2017 that the decision was in the hands of the two governments. This was conveyed by the CEO of Chevron John Watson who affirmed Kuwait’s “strong desire” to restart Wafra, while implying that Chevron was at the mercy of state-level decisions.

He also revealed that work had continued at the field to determine ways of lowering production costs — a claim given added credence by the CGG contract award — in the context of assuring listeners that decisions on a resumption would be unaffected by the OPEC-mandated production cuts in force since January.

Earlier that month, veteran former head of Chevron’s Saudi operations Ahmad Awad Al-Omar was appointed to take charge of the firm’s activities in Kuwait – a move interpreted as being designed partly to help smooth relations between the three parties.

While Saudi Arabia sits on a plump spare capacity cushion and is under no immediate pressure to raise output at a time of global oversupply, Kuwait has been struggling to compensate for the progressive loss of both onshore and offshore PNZ output since late 2014. It would require an increase in the zone’s capacity in order to meet an ambitious and increasingly improbable national target for 2020.

In a March 30 announcement, CGG said it had been awarded the contract to carry out the multi-year geoscience study.

According to CGG’s statement, the company will work with the geoscientists of Kuwait Gulf Oil Company to integrate recently-acquired and processed seismic data with multiple geological, petrophysical and production data sets in order to establish “a robust portfolio of exploration and prospects and asset development infill opportunities”.

The data was said then to be envisaged providing “a PNZ-wide reference study for Kuwait Gulf Oil Company with detailed subsets for each producing field”, seemingly implying that the study would furnish information pertinent to the offshore section of the zone.

Field

The maritime portion, operated by Kuwait Gulf Oil Company — Aramco Gulf Operations Company joint venture Khafji Joint Operations, likewise contains a single developed field — Khafji. This was producing around 300,000 barrels per day before Riyadh ordered its closure in October 2014, purportedly over environmental violations.

A planned $5 billion enhanced oil recovery project at Wafra designed to raise output by 80,000 barrels per day through steam-flooding was under way and scheduled for completion around the end of the decade before closure of the field. A second phase had been mooted to take total output to around 370,000 barrels per day by 2030.

Riyadh considered proceeding alone with a planned expansion at the Khafji field earlier this decade, when Kuwait’s obstructive Parliament objected to funding the project.

Kuwait is chasing a longstanding target of raising national output to 4 million barrels per day by the end of the decade.

No mention was made in CGG’s statement of either Chevron or Aramco. The possibility suggested of one of the two state parties independently implementing — with the other’s acquiescence — development of part of the acreage is not entirely new.

Kuwait Oil Company (KOC), a fellow KPC subsidiary which operates the state’s domestic fields, has an oft-reiterated goal of raising output to 3.65 million barrels per day by that date. It requires the PNZ to deliver around 350,000 barrels per day of equity oil to the state – and if such equal partition continued an overall increase in output to some 700,000 barrels per day from present capacity of around 550,000 barrels per day would be required.