The concession, which expires in February 2009, is the last remaining oil exploration and production concession in either Saudi Arabia or Kuwait operated by a foreign firm.

It covers a 5,000-square-kilometre onshore area of the Divided Zone. Together with Kuwait Gulf Oil Company, SAC operates three fields: Wafra, South Umm Gudair and South Fuwaris, with total production of about 300,000 barrels a day.

A fourth field, Humma, is under long-term evaluation for potential development.

The negotiations are an indication that Riyadh may be prepared to extend the concession. However, the former Divided Zone offshore operator, Japan’s Arabian Oil Company, did not have its Saudi Arabian and Kuwait concessions renewed in 2000 and 2003.

One element to SAC’s advantage is that a large proportion of the onshore Divided Zone’s output is heavy oil and its enhanced oil recovery expertise may need to be retained.