Foreign oil companies investing in Kuwait will be paid per barrel

Aug 16, 1999 02:00 AM

Foreign oil companies offering fresh investment in Kuwaiti oil ventures will be paid by a fee per barrel of oil extracted and not through production sharing agreements, a top oil official said recently.
"The IOCs will receive a service fee per barrel," said the deputy chairman of state-owned KPC, Nader Sultan, quoted by Shell in the Middle East magazine received here. IOCs will also receive "two incremental fees per barrel, the first for achieving the production targets and the second for increasing reserves," the oil chief said.
The new terms of foreign oil investment in Kuwait's massive crude reserves will come under "Operating Service Agreements" that allow the state to retain ownership of natural resources in line with the country's constitution.
"The IOCs will manage operations, they will invest all the capital and finance operational expenditures... and they will be required to increase reserves," Sultan said. But "the IOC will also receive full recovery of actual capital expenditure, and a yearly capital recovery allowance," he added.

In December last year Kuwait's Oil Minister Sheikh Saud Nasser al-Sabah said that the world's oil majors would invest up to $ 7 bn to develop oil fields neighbouring Iraq over the next five years. These fields include the northern Rawdatain, Sabriya, Ratqa, Abdali and Bahra oilfields and the western Minaqish and Um Ghudair fields, which have combined reserves of 16 bn barrels.
All the proposed fields are already operational, producing 590,000 bpd or 29 % of current production. But Kuwait wants to raise their production to about 1.3 mm bpd by 2005. "We are hoping to get the first agreement finalised by the end of 1999... the data is ready and we are in the final stages of preparing it for companies to examine," Sultan said.

Kuwait in the past has limited foreign participation to technical assistance, including accords with France's Total, British Petroleum and Chevron of the United States. Kuwait currently produces some 1.84 mm bpd following a March decision by OPEC to shave an additional 1.7 mm bpd off its total daily output. The emirate controls about 10 % of global crude reserves.

Source: AFP via Iinoil
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