Drivers

The Divided Zone covers an area of about 16,000 square kilometres between Saudi Arabia and Kuwait. There are significant onshore and offshore oil and gas deposits in the zone and exploration rights for production are split equally between the two countries.

Operating company

Al-Khafji Joint Operations (KJO) is responsible for oil operations in the Divided Zone, an area where the border is not properly defined. The company is a joint venture between Saudi Aramco subsidiary Aramco Gulf Operations Company (AGOC) and the Kuwait Gulf Oil Company (KGOC).

The Joint Executive Committee is the decision-making body that decides on all of the major policies, budgets and planning decisions. The Joint Operating Committee looks after day-to-day operations and activities. Both committees have six members from Saudi Arabia and Kuwait.

The initial agreement meant AGOC and KGOC managed their respective halves of the zone. In 2010, a more formal agreement was reached where the zone would be developed in a more co-operative manner.

Current operations

There are two major offshore fields, Khafji and Hout, which have a joint production capacity of 280,000 barrels a day (b/d), just under half of the Divided Zone’s total capacity of 580,000 b/d.

The offshore fields are currently undergoing rehabilitation that will allow the KJO to capture gas that is currently being flared. The US’ McDermott is executing the contract, which also involves the demolition and replacement of some existing offshore platforms, construction of a 50km pipeline to the onshore facilities and installing monitoring stations. 

Planned investment

The major offshore investment is the Dorra field development. The Dorra field contains an estimated 60 trillion cubic feet of gas.

The long-awaited scheme has been the subject of much speculation with regards to how the gas will be shared between Kuwait, Saudi Arabia and Iran, who all claim partial sovereignty of the field. This time the reason for the delay is believed to be the forthcoming change of management at KJO, which rotates between Saudi Arabia and Kuwait every three years.

KJO plans to build six platforms for extracting gas from the field, but could add another at a later date. The two oil platforms that were planned will now be deferred.

Challenges

The main challenge for KJO is being able to identify the best course of action that will suit both Kuwait and Saudi Arabia. The Dorra field development is a good example of this. Both countries must be willing to take the full offtake of gas from the field, but this is not possible. The Dorra field also brings in Iran, which claims partial sovereignty. With relations between the GCC and Iran strained, finding a suitable solution that will appease the Islamic republic will be tough.