Neutral Zone crude output could surpass 550,000 b/d by year-end: Kuwaiti minister

Crude production in the recently reopened Neutral Zone shared by Saudi Arabia and Kuwait has ramped up ahead of schedule and by year-end should surpass the 550,000 b/d that it totaled prior to its closure some five years ago, Kuwaiti oil minister Khaled al-Fadhel told S&P Global Platts in an interview.

Kuwait's share of production at the Al-Khafji field is currently around 70,000 b/d, while the Kuwaiti share of Wafra field production is 60,000 b/d, he said. Since the two countries split output from the fields evenly, that implies that total production from the Neutral Zone is around 260,000 b/d.

"By the end of 2020, we think it will go to even more than 550,000 b/d, which was our previous target, which we used to produce when it was healthy," the minister said. "With new technology and new research and new exploration techniques, we are actually looking for more production."

He added that the accelerated Neutral Zone development, along with additional output from heavy crude fields near Kuwait's border with Iraq, which are pumping about 30,000 to 60,000 b/d, should push Kuwaiti crude production to around 3.25 million to 3.30 million b/d in April, up from 2.90 million b/d in March.

The minister's comments came after Kuwait last week loaded its first exports of Al-Khafji crude in more than five years, while a second cargo was loading over the weekend, for a total of 2 million barrels.

Kuwait and Saudi Arabia brokered a deal in December to reopen the fields, which had been offline due to a political dispute.

The two countries had agreed in 1970 to co-manage and share crude production from the Neutral Zone equally.

The offshore Al-Khafji, shuttered since 2014, is jointly owned by Saudi Arabia's Aramco Gulf Operations Co. and Kuwait Gulf Oil Co., a unit of state-run Kuwait Petroleum Corp.

Saudi Aramco could not immediately be reached for comment.

The onshore Wafra, offline since 2015, is operated by KGOC and Saudi Arabian Chevron.

Chevron said in a statement Thursday that it and KGOC had "recently initiated start-up activities, which includes efforts to ensure its workforce is ready to safely restart operations and then production."

Prior to the production suspension, Al-Khafji crude had an API gravity of 28.5 degrees and 2.85% sulfur content, and Wafra had an API of 24.5 degrees and 3.88% sulfur content.

Tankers en route to Asia

A total of 2 million barrels has been loaded from the Ras al-Khafji terminal in the first week of April.

The VLCC Dar Salwa loaded a 1 million barrel cargo of Al-Khafji crude from the terminal over the weekend, data from Platts commodity tracking service cFlow showed.

The Dar Salwa is on its way to the port of Shuidong in southern China, according to cFlow data.

This port is close to Sinopec's 360,000 b/d Maoming Petrochemical refinery, which the company often uses to test new crudes. The refinery has recently been processing Norway's newest crude export grade Johan Sverdrup.

This second export from the terminal was on the Suezmax tanker Monte Toledo, which is on its way to Sunga Linggi in Malaysia, with a 1 million barrel crude cargo, cFlow data showed.

Sunga Linggi is a popular location for ship-to-transfer and is just north of Singapore.

The Monte Toledo had been booked for a Saudi Arabia to East voyage for early-April loading dates by trading house Mercuria, according to shipbroker reports seen last month by Platts.

A representative at Mercuria was unavailable for comment.