Kuwait, Saudi spat risks Dorra gas field delay
Dubai, September 19, 2012
Development of an offshore gas field by Kuwait and Saudi Arabia has been delayed for months, due to disagreement over where to share out the gas, and the project may not start up on time unless the dispute is settled soon, a senior Kuwaiti energy executive said on Wednesday.
The Dorra gas field, lying close to the shore of the two Gulf Opec allies, has long been a bone of contention between Kuwait and Iran which also lays claim to part of the field.
While Tehran and Kuwait are yet to agree on their maritime claims, Riyadh and Kuwait stuck a deal in 2000 and have since worked to develop the undisputed part of the field.
The plan had been to share out the gas pumped from Dorra at an offshore facility in the Gulf. But about six months ago Saudi Arabia came up with a new proposal, pressing its tiny neighbour to share the gas out on land at Khafji in a plan that would require another overland pipeline to be laid to Kuwait.
"There have been delays because we have issues about where the gas is supposed to be delivered," Hashim al-Rifai, managing director at Kuwait Gulf Oil Company (KGOC) told reporters at a conference in Dubai.
"The Saudis are now requesting the reconsideration to bring everything to Khafji and we take our share of gas from there, which the Kuwaiti government does not see eye to eye," he said.
Industry sources in Saudi Arabia confirmed that work on the project had been held up by the dispute and that the start up might also be delayed if a resolution is not found soon.
Sources said in February the front end engineering design (FEED) phase of the project was expected to be completed in June and that contracts to build the project were likely to be awarded in December. But bidding has not yet started.
"We are still drilling but there has been a slowdown in drilling," Rifai said. "If everything resumes we won't see a delay but if it delays any further from until the end of the year, we could slip a year."
The original startup date for the project was 2014.
Developing untapped gas reserves is crucial for the big oil producers of the Gulf to help meet surging demand for electricity due to a petro-dollar driven population boom.
Top oil exporter Saudi Arabia plans to raise its gas production capacity to 16 billion cubic feet per day (bcf/d) by 2020. Kuwait hopes to nearly quadruple its gas output to more than 4 bcf/d by 2030, including 0.5 bcf/d from Dorra.
Both need to boost gas supplies to reduce domestic oil consumption for power generation and boost exports, which Dorra's estimated trillion cubic feet of gas and 310 million barrels of oil should help achieve.
Once the project comes online, the gas will be divided equally between Saudi Arabia and Kuwait, with each country receiving 500 million cubic feet.
If there are delays, Kuwait would have to rely on importing more liquefied natural gas (LNG) or burn crude, Rifai said.
Earlier this year, Iran said it would develop its part of the field, which it calls Arash. The gas field is estimated to have a reserve of one trillion cubic feet along with some 310 million barrels of oil. - Reuters