Upstream operator Kuwait Oil Company (KOC) is planning to issue its first offshore field development contracts before the end of the year with an eye on starting drilling in 2016, according to a source close to KOC.

“A study is already being carried out and will be completed within a couple of months,” he said.

“KOC’s Prospect Study Evaluation department is responsible for the study and it is planning to prequalify companies for two offshore developments when the study is complete.”

The study will look at various locations and will include feasibility evaluation, according to the source.

“It has not been decided exactly where the drilling will be carried out, but one field development project is going to be located outside the Bay of Kuwait, near the Divided Zone. The other is going to be located within the Bay of Kuwait,” he said.

“They are allocating two rigs, one for each area.”

The offshore projects are being fast-tracked to compensate for lost production from the Divided Zone, which is shared by Saudi Arabia and Kuwait and has seen oil production rapidly decline over recent months and is expected to fall to zero over coming weeks.

KOC is also looking to ramp up production in northern Kuwait to compensate for the lost production in the Divided Zone, which is also known as the Neutral Zone.

“Progress towards these other options is happening very quickly. KOC is very keen to compensate for the lost production in the Neutral Zone,” said the source.

In April, Saudi Arabian Chevron informed Kuwaiti authorities of its plans to withdraw from the Wafra field in the Divided Zone, after months of suffering due to problems getting work permits from the Kuwaiti authorities.

The Wafra field development scheme is the third major project to be derailed in the Divided Zone in the past two years.

In August 2013, the Dorra Gas field development project, which had an estimated budget of more than $2bn, was shelved.

This was followed by the closure of the 310,000-barrel-a-day (b/d) Al-Khafji oil field on 16 October 2014, which was shut on the orders of Saudi Arabia.

Both Saudi and Kuwaiti officials have denied that political problems are behind the shutdowns, but contractors speaking off the record have said that the project disruptions are due to political issues that have their roots in a dispute over land use in the Divided Zone.

The Wafra field has a capacity of 240,000 b/d.

Before the closure of Al-Khafji in October, the Divided Zone was producing about 550,000 b/d, which was split evenly between Kuwait and Saudi Arabia.

According to the research company Energy Aspects, Kuwait will struggle to maintain its output of 2.8 million b/d amid the Divided Zone shutdown.

Before the closure of the Al-Khafji  and Wafra fields, Kuwait was already struggling to raise oil production from 2.8 million b/d to hit its 2020 production target of 4 million b/d.