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 gradually 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. 56). 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 the Saudi part of the concession. On Sept. 18, 2001, the Kuwaiti Oil Ministry and AOC signed an agreement which ended the Kuwaiti part of the concession. An AOC official was then quoted by the press as saying: "The concession agreement has now been terminated and will be followed with the signing of a new agreement. The official did not disclose details. But it was said by an independent APS source this will be a technical service contract similar to the ones which Kuwait has offered to foreign majors for most of the emirate's fields.

APS understands that the new agreement will include a long-term contract for AOC to lift at between 100,000-140,000 b/d of the area's crude oil output. AOC will also provide a soft loan for oil and gas development project in the divided zone's offshore area.

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.