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Kuwait Sees Neutral Zone Oil Pact With Saudis Within 45 Days

Fiona MacDonald

(Bloomberg) -- Kuwait expects to sign an agreement with Saudi Arabia to restart oil production from the neutral zone along their border within 30 to 45 days, according to a person familiar with the matter.

The pact, reached after months of intensive negotiations, won’t be final until it’s signed, the person said, asking not to be identified as the talks are private. Khafji, one of two fields in the zone, can start production immediately, while the Wafra field will need three to six months, the person said.

The neutral zone, which has been shuttered for at least four years, can produce as much as 500,000 barrels a day. Negotiations continue with the Kuwaiti authorities, but even if production resumes, the area would not add oil to global markets because both countries adhere to output limits that OPEC has extended into early 2020, according to a person familiar with Saudi thinking.

Talks with Saudi Arabia continue and are “very positive,” Kuwait’s Deputy Foreign Minister Khalid al-Jarallah was cited as saying by the Kuwait News Agency late Saturday. When an agreement is reached, the countries will start talks on resuming production, he said. Officials from Kuwait Petroleum Corp. couldn’t be reached for comment.

The neutral zone hasn’t produced anything since the fields were shut after spats between the two countries in 2014 and 2015. The barren strip of desert straddling the Saudi-Kuwaiti border -- a relic of the time when European powers drew implausible ruler-straight borders across the Middle East -- can pump about as much as OPEC member Ecuador.

The disagreement between Saudi Arabia and Kuwait started over the Wafra field, which is operated by Chevron Corp. Saudi Arabia extended the original 60-year-old concession of the field, giving the U.S. company rights over Wafra until 2039. Kuwait was furious over the announcement and claims Riyadh never consulted it about the extension.

(Adds comments from person familiar with Saudi thinking in third paragraph)

To contact the reporter on this story: Fiona MacDonald in Kuwait at fmacdonald4@bloomberg.net

To contact the editors responsible for this story: Nayla Razzouk at nrazzouk2@bloomberg.net, Bruce Stanley

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