Kuwait, Saudi agree to resume output at disputed oilfield

Saudi Arabia and Kuwait have reached a deal to resume production at the disputed Khafji offshore oilfield, Kuwait's acting oil minister said on Tuesday.

"An agreement has been reached with the Saudi side at Aramco to resume production at Khafji field in small quantities," Anas al-Saleh told parliament during a debate.

Saleh, who is also the finance minister, said the quantities will increase "gradually" after resolving environmental issues over which the field was shut down.

A number of maintenance contracts have been signed in preparation for the resumption of production, the minister said without saying when production will resume or how much oil will be pumped.

Production at Khafji, which pumped over 300,000 barrels per day and was jointly operated by the two countries, was halted in October 2014. Riyadh cited environmental issues for the shutdown.

Khafji is part of the neutral zone which is operated jointly by the two Arab nations and production is divided equally.

The other field is Wafra where production was also halted in May last year. Wafra pumped around 200,000 bpd.

Kuwait had initially said that Saudi Arabia unilaterally stopped production due to pollution concerns even though it was entitled to five years' notice under the joint agreement.

The two Gulf neighbours 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 dispute has been a blow to Kuwait which, unlike its much larger neighbour, has little spare output capacity to compensate for drops in production.

Kuwait is pumping around 3.0 million bpd.