Kuwait confirms $11bn Neutral Zone plan to raise output

OIL PRODUCTION: Kuwait to spend $11 billion over 20 years to boost production in Neutral Zone. (Getty Images)

Kuwait Gulf Oil Co (KGOC) plans to invest around $11 billion in the next 20 years to boost oil output capacity to 900,000 barrels per day from a divided zone it shares with Saudi Arabia, a top oil official said on Wednesday.

KGOC also plans to spend billions of dollars to develop the massive Dorra gas field with Saudi Arabia, said Bader al-Khashti, chairman of the state-run firm, which operates on the Kuwaiti side of the shared Neutral Zone with Saudi Arabia.

"The plan is to spend around $11 billion over the next 20 years...This includes all the projects that we have in mind for the development, expansion and drilling," Khashti told Reuters in an interview.

But Kuwait and Saudi Arabia will miss an output capacity target of 624,000 bpd this year due to field maintenance and new exploration projects in the area, Khashti said.

Current average output capacity from the Neutral Zone is around 538,000 bpd.

"I think as a fair target of the (Neutral Zone) area is to go for between 350,000-450,000 bpd as Kuwait's share by 2030," he said.

Among the projects to raise capacity in the Neutral Zone is to use steam injection to boost heavy oil output from the al-Wafra field in partnership with US oil major Chevron Corp and Saudi Arabia.

The project, which is expected to cost about $10 billion and could be used across the area, will boost the recovery rate of heavy oil to 40 percent from the current 5 percent, Khashti said.

"By September, we will start a pilot project... if it is successful then we will make it fully fledged," he said.

The firm, along with Saudi Arabia, is also embarking on a new oil and gas exploration project in the onshore area, which includes the Wafra field, to be completed by 2013.

Both projects could boost output from the onshore area to around 400,000 bpd from around 280,000 bpd now, he said.

KGOC targets spending 340 million dinars ($1.17 billion) in 2009 to boost oil output from both Wafra and Khafji fields.

The firm also plans to boost output from the offshore area, which includes the Khafji field, to 350,000 bpd by 2013-14 from around 285,000 bpd now, he said.

Kuwait also plans to invest about $4-5 billion to develop the massive Dorra gas field, a point of dispute with Iran, from which it aims to start production by 2017, Khashti said.

"We are drilling on the Kuwaiti side, in the divided zone and it's completely in the southern area. It's away from any disputed areas," he said.

Output is expected to be around 800 million cubic feet per day (cfd), which will be divided between Kuwait and Saudi Arabia, which is represented by Aramco Gulf Operations company in the area, he added.

The field lies on the Gulf continental shelf between OPEC producers Kuwait, Saudi Arabia and Iran. Riyadh and Kuwait reached a deal on their part of the maritime border in 2000 but it has remained a disputed area between Kuwait and Iran.

Kuwait, the world's fourth-largest oil exporter, has one of the highest per capita power consumption rates in the world and has struggled to keep up with the growing demand.

It had said it was considering importing gas from Iran and Iraq to help meet rising demand and is also negotiating to import gas from Qatar.

The global financial crisis and lower oil prices would not derail the company's expansion plans, Khashti said.

"I think this is the best time for us to carry out projects because things are much cheaper than when oil prices go up," he said.

Kuwait said in March it was on course to meet its long-term capacity target of 4 million bpd in 2020 and currently has production capacity of 3 million bpd.

The OPEC member, which sits on a tenth of global oil reserves, pumped 2.23 bpd in April, according to a Reuters survey. (Reuters)

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