Japan's Arabian Oil agrees with Kuwait on offshore oil operations

Sep 10, 2001 02:00 AM

Japan's Arabian Oil said it had agreed basic terms with the Kuwaiti government for continuing oil operations in an offshore zone shared by Kuwait and Saudi Arabia. The framework agreement means Japan's largest oil producer has cleared the first major hurdle for a new contract covering the Kuwaiti sector of the Khafji field. Arabian Oil's existing drilling concession is due to expire in January 2003.
A successful outcome to negotiations with Kuwait is crucial for Arabian Oil after it lost its 40-year-old concession for drilling in the Saudi portion of the field in February last year. "We negotiated with the Kuwaiti oil ministry under the July 7 Memorandum of Understanding and negotiations were concluded on September 9 in a manner satisfactory to both sides," Arabian Oil said.

In July, Kuwaiti Oil Minister Adel al-Sebeih signed a memorandum with the visiting Japanese trade and industry minister Takeo Hiranuma to open talks on a new contract. Both sides said the existing concession-based contract would not be renewed. The two-month talks were the first phase of negotiations and form the basis for a new contract expected to be signed by the end of this year.
Arabian Oil said it would announce the basic rules after the Kuwaiti government completes the necessary domestic approval procedures. The Nihon Keizai Shimbun reported the new pact would last for five years and the Japanese partner would become a contractor of the Kuwaiti government.
Arabian Oil would also lose its ownership of oil-producing facilities there as the 1962 Kuwaiti constitution bans the foreign ownership of the country's oil wealth, the economic daily said in the evening edition. The existing contract dates back to before the 1962 constitution.

Arabian Oil would instead receive oil-drilling commissions from Kuwait and would be able to export most of the oil produced to Japan, it said. The company currently produces 140,000 bpd of crude oil in the zone against the total output from the oilfields of 350,000 barrels. The 140,000 barrels account for some 20 % of output from overseas oil fields developed by Japanese firms.
Saudi Arabia and Kuwait each has a 10.9 % stake in Arabian Oil, while the main Japanese shareholders include Tokyo Electric Power, Kansai Electric Power and Nippon Steel.

Source: AFP
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