KUWAIT - The Divided Zone.

The DZ is shared equally by Kuwait and Saudi Arabia, under a treaty signed on Dec. 2, 1922 to settle a territorial dispute between the two countries. The treaty was revised on July 7, 1965. On July 2, 2000, the governments of Kuwait and Saudi Arabia signed a border agreement settling a long-standing dispute in their territorial waters.

The 1965 joint administration accord was supplemented in 1969 by an agreement whereby the northern half was administered by Kuwait and the southern part was administered by Saudi Arabia. A joint Kuwaiti-Saudi committee oversees exploitation of these resources.

Texaco, which has the onshore concession to 2010 in the northern half, shares its area's oil production equally with Kuwait. Saudi Arabia gets taxes and royalties on Texaco's share.

In the DZ's offshore territory, Arabian Oil Co. (AOC) of Japan lost the Saudi concession when it expired on Feb. 27, 2000, despite more than 30 months of negotiations. AOC now is hoping its Kuwaiti concession, which expires in Jan. 4, 2003, would be renewed. In March AOC submitted to the Kuwaiti authorities a proposal detailing its offer for an extension of its drilling rights, with formal negotiations to begin later this year. But on March 10, Kuwait's daily Al Anbaa quoted Deputy Oil Minister Issa Al Oun as saying it would be "difficult" for Kuwait to renew the concession "under its old conditions". He did not elaborate.

The DZ has five producing oilfields, three onshore and two offshore, and a huge gas field offshore yet to be tapped. On Kuwait's side, onshore operations are undertaken by Texaco. (The former operator Getty Oil was sold to Texaco in 1984, with Texaco purchased by Chevron in 2000).

The Onshore Fields - Wafra: Found in 1953 by American Independent Oil Co. (Aminoil), Wafra is the largest of the three onshore fields. It went on stream in 1954. Its reservoirs range from shallow to Paleocene-Eocene structures. Hundreds of its 430 wells were set ablaze by the Iraqis. Because of low pressure, the fires died out quickly, spewing toxic fumes.

Wafra includes North Fuwaris, a structure to the west. Production before Iraq's invasion exceeded 85,000 b/d of 24 deg. oil, with 3.4-3.6% S, processed at Mina Saud and Mina Abdullah refineries. It had been shut down for some time in the 1960s, when desulphurisation facilities were being built.

Wafra's development in the 1980s was done jointly by KOC and Texaco. Shallow well drilling and workover services were tendered in April 1990. After the war, the field was rehabilitated together with South Fuwaris and South Umm Gudair. Now they have related production and gathering systems. In Oct. 1998 Texaco and KOC had a new discovery at the Humma 4 well. It tested 3,400 b/d of 32 deg. API oil near Wafra field. Texaco was to complete seismic work by mid-1999 and then drill two delineation wells.

Texaco's output averages 270,000 b/d, up from 100,000 b/d in 1991/92 and 120,000 b/d in 1995, compared to 140,000 before the 1990 Gulf crisis. In March 1995, KOC and Texaco launched 3-D seismic surveys and a $600m plan to raise the area's capacity to 300,000 b/d by mid-1999 and 420,000 b/d by 2005. The surveys covered a deep light oil reservoir in Wafra found by Texaco in early 1993 and, on the Saudi side, the Humma reservoir which has light oil as well. Development was to involve the drilling of 500 wells.

Onshore oil reserves, including those of South Fuwaris and South Umm Gudair, have been estimated at 3.5 bn barrels. The operator on the Saudi side is called Saudi Arabia Texaco. On the Kuwaiti side it acts on behalf of Wafra Oil Co.

South Fuwaris, found in 1962 and on stream in 1964, is a small field where 23-26 deg. API oil with 3.5% sulphur is produced from a Ratawi limestone, at the rate of about 2,500 b/d. It has had 9 wells.

South Umm Gudair, found in 1966 and on stream in 1968 near the Kuwaiti border, is an extension of Umm Gudair. Its initial recoverable reserves were estimated at 450m barrels of 24.3-27 deg. API and 3.5% S oil. Before the Gulf crisis it was producing 40,000 b/d, compared to 51,000 b/d in 1979, from Minagish Oolites of the Lower Cretaceous Ratawi group.

The Offshore Fields: Khafji and Hout, found and developed by AOC after it won the concessions in 1958, are extensions from Saudi Arabia's Safaniyah, the world's largest offshore field. Iraqi attacks caused no serious damage to AOC's operations, except for storage tanks and facilities near a refinery in the Khafji area. AOC was able to resume production almost immediately after the war and raise it to 280,000-300,000 b/d in less than a year.

The offshore operations are done jointly by Aramco Gulf Operations Co. (AGOC) and AOC, under an agreement signed in March 2000 and made effective from Feb. 28 to Jan. 4, 2003. A six-member committee consisting of two representatives from AGOC and AOC, together with officials from the Saudi and Kuwaiti oil ministries, decides on production plans, budgets and other aspects of running the offshore fields. Related projects handled jointly now include a $90-100m power plant to consist of three 30 MW gas turbine units which is to boost their operations. AGOC and AOC are also installing a new offshore well jacket and upgrading facilities.

AOC had said in the 1990s, hoping it would have both concessions renewed, that it needed big investment to renew facilities more than 30 years old, to develop a shallow reservoir called Limestone-A it had found containing 4 bn barrels of light oil, and to develop the Dorra gas field. Japan National Oil Corp. (JNOC) had financed 75% of a $33m, five-year geological study of Limestone-A launched in early 1992. This reservoir was proposed to be on stream in 1997. But the project was not started. In 1998 JNOC was involved in studies for a world-scale ethane or LPG based ethylene complex in the DZ, with the gas to come from Dorra and from Khafji and Hout.

Khafji was found in 1959 and put on stream in 1960. It has over 165 wells in several reservoirs of the Middle Cretaceous age, from Rumaila A limestones with 27-28 deg. API oil and 2.8% S sulphur (through a Wara sandstone and Mauddud limestone with 26-28.5 deg. and 2.8% S) to the Burgan Nahr Umr sand with similar oil. It also produces from a Lower Cretaceous Ratawi limestone, with 33-35 deg. oil and 1.7% S. Initially recoverable reserves were estimated at 6.3 bn barrels. In 1979, the field's production averaged 405,000 b/d, dropping to 243,000 b/d from 1985.

Hout, found in 1963 and on stream in 1969, is 10 km long and 5 km wide. It has almost 35 wells in three carbonate reservoirs in Middle Cretaceous Mishrif dolomitic limestones, an underlying Rumaila A limestone and a Lower Cretaceous Ratawi limestone, with oil of 35.3 deg. API having 1.4% S. Recoverable oil reserves were estimated at 197m barrels. In 1979, the field's output averaged 8,000 b/d. It rose to 23,000 b/d from 1985.

Dorra, an undeveloped field found in 1967 by AOC, is a 10x7 km structure containing sour oil. One well indicated over 35 TCF of non-associated gas from a Middle Cretaceous reservoir. In another well about 163m barrels of oil were estimated in a Mauddud B limestone.

Lulu is a small undeveloped field on the median line with Iran's waters, found by AOC in 1967. It is an extension of Iran's Esfandiar, with the main reservoir of 30-34 deg. oils being a Ratawi limestone.