ShareKUWAIT/RIYADH: Kuwait reinvited Iran on Monday to talks on their sea borders after Tehran said it was ready to start drilling in a disputed gas field in the resource-rich Gulf. Kuwait said it held “exclusive rights” to the maritime field along with Saudi Arabia, after the neighboring countries agreed to jointly develop it last year. The field, known as Arash in Iran and Durra in Kuwait and Saudi Arabia, is also claimed by Tehran in a dispute which dates back several decades.
“The State of Kuwait and the Kingdom of Saudi Arabia... alone have exclusive rights to the natural wealth in the Al-Durra field,” a Kuwaiti foreign ministry statement said. “The State of Kuwait renews its invitation to the Iranian side to start negotiations on the demarcation of the maritime borders,” it added. Kuwait later on Monday said it “categorically and totally” rejects purported Iranian activities in the Durra field. “We categorically and totally reject Iran’s planned activities around the Durra offshore gas field,” Minister of Oil Saad Al-Barrak said in a statement, emphasizing that only Kuwait and Saudi Arabia own “exclusive rights” to the field.
Kuwait was “surprised” by Tehran’s plans and intentions, which “contravene the basic principles of international relations”, the minister underlined. Last year, Kuwait and Saudi Arabia signed an agreement to develop the field, despite objections from Tehran which branded the deal as “illegal”. Mohsen Khojsteh Mehr, managing director of the National Iranian Oil Company, said last week that “there is full preparation to start drilling in the joint Arash oil field”. “Considerable resources have been allocated to the board of directors of the National Iranian Oil Company for the implementation of the development plan for this field,” he said in remarks carried by Iranian state media.
His comments came as Saudi Arabia and Tehran boost cooperation after a shock decision to resume ties, announced in March, ended seven years of enmity between the major Gulf powers. The row over the Durra field stretches back to the 1960s, when Iran and Kuwait each awarded an offshore concession, one to the Anglo-Iranian Oil Company, the forerunner to BP, and one to Royal Dutch Shell. The two concessions overlapped in the northern part of the field, whose recoverable reserves are estimated at some 220 billion cu m. Iran and Kuwait have held unsuccessful talks for many years over their disputed maritime border area, which is rich in natural gas.
Saudi Arabia is also a part of the dispute since it shares with Kuwait maritime gas and oil resources in the area. Iranian drilling of the field in 2001 spurred Kuwait and Saudi Arabia to agree on a maritime border deal which stipulated that they jointly develop the offshore zone. Meanwhile, Saudi Arabia said on Monday it was extending a voluntary oil production cut and Russia said it was slashing exports, as major producers tried to prop up slumping prices. The cut by Riyadh of one million barrels per day was first announced after a June meeting of oil producers and took effect at the weekend. Saudi Energy Minister Prince Abdulaziz bin Salman noted at the time that it was “extendable”.
In a report on Monday announcing that the cut would continue through August, the official Saudi Press Agency said it “can be extended” further, citing an energy ministry source. “The source confirmed that this additional voluntary cut comes to reinforce the precautionary efforts made by OPEC+ countries with the aim of supporting the stability and balance of oil markets,” SPA said. Also on Monday, Russia unveiled its export cut of 500,000 bpd for August “as part of efforts to ensure that the oil market remains balanced”. The announcement by Alexander Novak, Russian deputy prime minister responsible for energy policy, came on the back of cuts to Russian oil production this year by the same volume as part of Moscow’s response to Western sanctions levied over the conflict in Ukraine.
Recent efforts by OPEC+ to bolster prices by reducing output have not succeeded, and analysts expressed doubt this one would be any different despite initial increases recorded Monday. “It’s the usual knee-jerk reaction to reports of production cuts,” said IG analyst Chris Beauchamp. “But given... it’s not a coordinated move from all (OPEC+) members it seems hard to imagine there’s much more upside in this.” The initial market reaction was muted. Brent was up 0.98 percent to $76.15 per barrel, and West Texas Intermediate was up 1.02 percent to $71.36 per barrel.
Since the beginning of the year, Brent is down 11 percent and WTI is down 7 percent, as a sluggish recovery in China and worries about the US economy weigh on demand forecasts. The average price of Russian Urals was $52.17 per barrel during the first half of 2023, down from $84.09 during the same period last year, the Russian finance ministry said Monday. That drop reflects the effects of a price cap imposed in December by a coalition involving the Group of Seven leading economies, the European Union and Australia.
Saudi Arabia is counting on high oil prices to fund an ambitious reform agenda that could shift its economy away from fossil fuels. Oil giant Saudi Aramco, the jewel of the kingdom’s economy, said it recorded profits totaling $161.1 billion last year, allowing Riyadh to notch up its first annual budget surplus in nearly a decade. Analysts say the kingdom needs oil to be priced at $80 per barrel to balance its budget, which is well above recent averages. – Agencies
