Last updated: 19 October, 2014

Kuwait oil union slams Saudi halt to joint output

A Kuwaiti oil trade union on Sunday condemned the unilateral closure by Saudi Arabia of an offshore oilfield jointly operated by the Arab neighbours, calling on the government to intervene.

Fadghoush al-Ajmi, head of the workers union at Kuwait Gulf Oil Co. (KGOC), urged ministers to take action to ensure that production at the Khafji oilfield resumed.

The head of operations at Khafji, Abdullah Helal, who represents Saudi national oil company Aramco, cited environmental reasons for ordering the halt to the field’s 311,000 barrels per day output, Kuwaiti media reported.

Media cited an internal memo issued by Helal saying that the level of harmful emissions from the operations far exceeded the allowed pollution percentage.

Khafji is part of the neutral zone between Kuwait and Saudi Arabia which is jointly operated by the two nations and pumps around 700,000 bpd. The production is shared equally between them.

Al-Rai newspaper quoted unidentified Kuwaiti oil sources as saying they were surprised by the decision as the two countries had an understanding to address environmental issues by 2017.

Local media said the closure could be the result of differences between the two countries over a small export facility in the nearby Al-Zour area where Kuwait has decided to locate a large new refinery.

Independent MP Faisal al-Kundari has meanwhile asked Oil Minister Ali al-Omair to brief parliament about the reasons for halting production at Kafji and if Kuwait had been informed before production was stopped.

Kundari also asked Omair if OPEC member Kuwait will be able to make up for lost oil production and about financial losses expected to be incurred by the Gulf emirate.

Both countries have excess production capacity and are likely to make up any loss in output if the problem is not quickly resolved.

Saudi Arabia, the world’s largest oil exporter, is pumping around 9.6 million bpd and has just under 3.0 million bpd of extra capacity.

Kuwait on the other hand, has a production capacity of over 3.2 million bpd and is pumping an average of 3.0 million bpd.

The two governments signed the neutral zone agreement almost 50 years ago.