KUWAIT - 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. AOC resumed production immediately after the 1991 war and raised it to 280,000-330,000 b/d in less than a year.

The state-owned Kuwait Gulf Oil Co. (KGOC), set up in March 2002, has a wide mandate, overseeing Kuwait's interests in the DZ's offshore operator, Khafji Joint Operations (KJO), as well as all of the emirate's offshore E&P activities. Before the KGOC took over in January 2003, there was little new investment in the DZ's Kuwaiti sector while the previous concession holder, AOC, wound down its operations.

In addition to its offshore Hout and Khafji fields, the KGOC has since 2005 taken over Kuwait's interests in the onshore Wafra field. Production from the three onshore fields will be jointly managed by SAT and the KGOC until 2010, when the former's concession will have expired. There will have to be some restructuring both within KOC and the KGOC to encompass the changes. Charles River Associates (CRA) of the UK has been appointed to advise the KGOC on the restructuring and how to improve its efficiency.

With an average production cost of $4.50/b, output from the DZ is almost four times more expensive than the rest of Kuwait. The KGOC is not exploring at the moment. Neither the KGOC nor KOC has the full technical ability to explore for or exploit offshore petroleum deposits. Foreign expertise would have to be imported, but given local resistance to IOC involvement in Kuwait's upstream sector, this would be politically sensitive. However, KGOC's top management does not rule out IOC involvement somewhere down the line. Either Saudi Aramco or IOCs could help out, eventually, particularly for the offshore Dorra field of non-associated gas which Kuwait badly needs.

Saudi employees in the DZ operations outnumber their Kuwaiti counterparts by two to one. Evening out the employment ratio will be one of KGOC's objectives. On the oil front, attention will focus on plans to increase the capacity of the existing fields by exploring laterally and vertically to below 8,000-9,000 ft and carrying out further 3D seismic surveys. The project will also examine ways in which production can be boosted through the expansion of gas-lift systems. There will be a greater focus on achieving higher production levels while minimising costs.

Future operations in the DZ will be determined by the 2020 plan prepared by the two sides. Increasing capacity, employment, the Dorra field and the extension of the SAT concession will be the key issues in the discussions. There is some talk about the KGOC and AGOC raising DZ capacity to 1m b/d under the 2020 plan, but this would require a substantial effort.

Khafji was found in 1959 and put on stream in 1960. It has over 165 wells in several Middle Cretaceous Fms from Rumaila A limestones with 27-28[degrees] API oil and 2.8% S - through a Wara sandstone and Mauddud limestone with 26-28.5[degrees] and 2.8% S - to the Burgan Nahr Umr sand with similar oil. It produces from a Lower Cretaceous Ratawi Fm, with 33-35[degrees] oil and 1.7% S. Recoverable reserves were first estimated at 6.3 bn barrels. In 1979, the field's output 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 by 5 km. It has almost 35 wells in three carbonate Fms in Middle Cretaceous Mishrif dolomitic limestones, an underlying Rumaila A limestone and a Lower Cretaceous Ratawi limestone, with oil of 35.3[degrees] API oil 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 interesting structure undeveloped and found in 1967 by AOC, is a 10x7 km field containing sour oil and over 35 TCF of non-associated gas from a Middle Cretaceous Fm. This straddles the territorial waters of Kuwait, Iran and Saudi Arabia. Kuwait has been negotiating with Tehran and Riyadh on development of the field's gas reserves. Kuwait needs the gas for its domestic market. Kuwait is also negotiating with Tehran to import Iranian natural gas by pipeline.

The KGOC is optimistic Kuwait will reach agreement with Riyadh and Tehran over the field and that a final settlement may be achievable before too long. KGOC's Chairman and MD Abdel-Hadi al-Awwad was in 2005 quoted as saying: "I wouldn't say an agreement will be reached this year, but I'm confident that we could take over a part of Dorra in the not-too-distant future. As everyone knows, gas is extremely important to Kuwait. Dorra is a medium-sized field and while it wouldn't satisfy all our gas needs, it would go some way to meeting them". Development of Dorra is one Kuwait's offshore ambitions.

In June 2006, the Kuwaiti Energy Ministry's Under-Secretary Issa al-Aoun said Kuwait was to start production of gas within three years from parts of Dorra which were not in dispute with Iran, adding: "We have already issued two tenders. The first for 3-D and 2-D seismic surveys with foreign companies, and the other with the Kuwaiti navy to clean the area". Seismic surveys were then planned to begin in three months and take six months to complete in the 70% of Dorra which was not disputed by Iran. This part is equally owned by Kuwait and Saudi Arabia and "higher authorities in both states have given the green light to start development of the field", Aoun said.