SAUDI ARABIA - The Divided Zone.

The divided (formerly "neutral") zone 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. The 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. An undivided half interest in all resources was maintained over the entire area by each state. A joint Kuwaiti-Saudi committee oversees exploitation of these resources.

Texaco (now part of ChevronTexaco), 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.

Texaco's oil production capacity reached 300,000 b/d in mid-1999. It had risen after the Gulf war from 100,000 b/d in 1991/92 to 120,000 b/d in 1995 and 270,000 b/d in late 1998 and the first half of 1999. This should rise to 420,000 b/d by 2005.

Texaco operates three onshore oilfields: Wafra, South Fuwaris and South Umm Gudair (see their profiles in the Kuwait survey in Vol. 60). The former US operator onshore, Getty Oil, was sold to Texaco in 1984.

Aramco Gulf Operations Co. (AGOC) is a unit of Saudi Aramco set up at end-February 2000 to take over half the operations of Arabian Oil Co. (AOC) of Japan - which had the offshore concession to February 2000 on the Saudi side and to Jan. 4, 2003 on the Kuwaiti side. AOC lost both concessions and now works as a service contractor for Kuwait Gulf Oil Co. (KGOC).

The offshore area's oil production capacity is 300,000 b/d maintained since the 1980s. The area has two producing oilfields: Khafji and Hout. It also has a huge but undeveloped gas field, Dorra, and a very small undeveloped structure called Lulu which is on the median line with Iran's waters and forms an extension of Iran's Esfandiar field.

AGOC and KGOC have formed an operating JV called Khafji Joint Operations (KJO), which is spending $1.2 bn to upgrade and expand the capacity by 2007 in two phases. Toyo Engineering Corp. got a contract in June 2003 to repair and upgrade the oil production facilities by end-2004 to ensure another 10 years of operations. Phase-2, 2005-07, will require Toyo to prepare a plan and designs for rebuilding the Al Khafji facilities to ensure stable production levels during the next 30 years.