Saudi Arabia, Kuwait seek to realize Al-Durra gas field’s potential

Saudi Arabia, Kuwait seek to realize Al-Durra gas field’s potential

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The foreign ministries of Saudi Arabia and Kuwait last month released a joint statement affirming their right to develop and “exploit the natural resources” of the Al-Durra gas field in the Kuwaiti-Saudi neutral zone in the Arabian Gulf. This is likely to be met positively by the global community, particularly by European countries, whose supplies of natural gas are being stretched due to the war in Ukraine. While the EU, which gets about 40 percent of its gas from Russia, has placed tough sanctions on Moscow in response to its attack on Ukraine, without a reliable alternative supply of oil and natural gas it cannot afford to follow the US in fully boycotting Russia’s fuel.

The two countries also repeated a previous invitation to Iran to negotiate the eastern border of the submerged divided zone. The initial invitation, which did not receive a response, was sent following Tehran’s claim that Kuwait and Saudi Arabia’s statement of March 21 to initiate development of the region was illegal, despite a memorandum of understanding being signed in December 2019. Iranian Foreign Ministry spokesperson Saeed Khatibzadeh claimed that parts of Al-Durra — which Iran calls Arash — are located in areas between Iran and Kuwait whose boundaries have not been defined.

The Kuwait Petroleum Corporation and the Saudi-based Aramco Gulf Operations Company had announced the joint venture through Saudi Arabia’s energy minister and the Kuwaiti minister for oil, electricity, water and renewable energy. It is positive to see a move to include renewable energy in this ministerial role to demonstrate Kuwait’s commitment to combating climate change and safeguarding the health of both people and planet.

The Al-Durra field is not new — it was discovered in 1967 and is estimated to have gas reserves in the region of 20 trillion cubic feet. Last November, the Kuwait Petroleum Corporation had a consultant assess the safest and most economical ways to develop the site and segregate the stakeholders’ share in line with previous agreements and the memorandum of understanding. The Kuwaiti-Saudi contract that was signed last month details plans to extract up to 1 billion cubic feet of pipeline-quality natural gas per day, with an additional 84,000 barrels per day of condensates. Byproducts will include natural gas liquids such as butanol and propane.

It is likely that the contention has flared up as a result of the sharp rise in the price of natural gas

Dr. Bashayer Al-Majed

However, Khatibzadeh claims that, according to international regulations and procedures, all three nations must be included in the negotiations and have a share of the opportunities to tap into the wealth offered by the gas field. Iran insists the Saudi-Kuwaiti agreement contravenes previous agreements and is therefore not valid.

It is likely that the contention has flared up as a result of the sharp rise in the price of natural gas due to the limited supply across Europe as a result of the war in Ukraine, which is set to increase the profits to be made from Al-Durra. Iran does not want to risk losing out on the chance to exploit that opportunity while it lasts. Indeed, local media reports state that Iranian Oil Minister Javad Owji has announced Iran is to begin drilling in the Arash field, while Khatibzadeh claimed that Tehran has the right to exploit the area’s resources. If this is true, tensions could build further between the Kuwait-Saudi partnership and Iran.

This follows the acrimony that has already built up following the March attack on a Saudi oil refinery by the Houthi rebel group in Yemen. Past UN investigations have concluded that Iran was supplying the Houthis with military aid. Riyadh has emphasized that such attacks place added risks on the safe delivery of oil from the Kingdom to the rest of the world — the suggestion being that it is in everyone’s interest to support the fight against the Houthis.

Despite US President Joe Biden and UK Prime Minister Boris Johnson both asking Saudi Arabia to increase its oil and gas production — the Kingdom and the UAE are the only OPEC nations with sufficient spare capacity to meet Europe’s needs should the EU boycott Russian energy — Riyadh opted to stick to its OPEC+ deal (to which Russia is a party) to limit its production increase to 400,000 barrels a day, with a further 32,000 from May 1. This aims to restrict inflation and stabilize prices after the COVID-19 pandemic greatly reduced demand for oil. However, Saudi Aramco, which saw record profits in 2021, did last month agree to increase expenditure on oil production from $31.9 billion to $40 billion to $50 billion this year.

If Saudi Arabia and Kuwait can agree with Iran to formalize the eastern border of the submerged divided zone to enable them to extract natural gas from Al-Durra without exacerbating tensions, it could give a boost to the Gulf economies and help secure a safe supply for Europe. There is huge potential in Al-Durra that is waiting to be realized.

Dr. Bashayer Al-Majed is a professor of law at Kuwait University and visiting fellow at Oxford. Twitter: @BashayerAlMajed

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