Kuwait's long-standing ambition to increase its crude production capacity by nearly 1 million b/d to 4 million b/d by 2020 continues to face a number of major hurdles, not least the ongoing political dispute over the Partitioned Neutral Zone, shared with Saudi Arabia.

Kuwait's previous oil minister Essam al-Marzouq and his Saudi counterpart Khalid al-Falih had been in talks for more than two years, since Saudi Aramco unilaterally shut production from the 300,000 b/d offshore Khafji field in October 2014.

The 200,000 b/d onshore Wafra field ceased production in May 2015.

Marzouq has described the dispute as "simple matters that need to be thrashed out," but after more than two years of talks to resume as much as 500,000 b/d of production from the PNZ, no solution appears to be at hand.

This is despite an agreement between the two countries to restart production from Khafji at the end of March last year.

It will now be the task of Kuwait's new oil minister, Bakheet al-Rashidi, appointed December 11, to try to finally bring about a positive result.

Along with negotiations to restart the PNZ production, Rashidi will also have to try and push oil company involvement through Kuwait's notoriously restive parliament.

In the meantime, the state's upstream operator Kuwait Oil Company has been looking at how it can add more to its own capacity should the dispute continue for the long term.

Of the 4 million b/d 2020 target, KOC is set to contribute 3.65 million b/d, with the remainder coming from Kuwait's share of the PNZ.

"We are updating our strategy for 2040," said a source close to KOC's planning. "We need to think about what happens if the PNZ is out for the long term. The 4 million b/d target will still stand, but KOC will have to take a larger share."

The new strategy has not yet been approved by KOC's parent company, Kuwait Petroleum Corp, the source said.

For KOC to reach its 3.65 million b/d target it will need to maintain production at the giant Burgan field and add around 700,000 b/d of capacity at its northern fields, while also replacing natural declines at other fields.

Northern Kuwait is where the main capacity increases are expected to come from. It currently produces around 1 million b/d, out of the country's 2.7 million b/d total.

Over the last year, Kuwait has started production at a 15,000 b/d heavy oil processing plant at the Umm Niga field.

KOC hopes to reach heavy oil production of 60,000 b/d in 2018 from Lower Fars, and 25,000 b/d from the Umm Niga field in 2017-2018.

It is also working on increasing production from the Jurassic fields which will help Kuwait take some pressure off the Burgan oil field, which has been in operation since 1946.

Despite its age, the field remains the largest single contributor to the country's oil output, accounting for more than 50% of all oil produced.

JURASSIC GAS

Kuwait is also starting to see the fruits of three major contracts signed under its previous parliament, with three early production facilities at its Jurassic Gas project coming online this year.

Each can produce 40,000 b/d of light crude, along with 104 MMcf/d of gas at the Sabriya, Umm Niqa and East and West Raudhatain fields.

KOC also announced a major new tender for the latest phase of the Jurassic Gas project in September.

Known as JGF-1, the facility will have the capacity to produce nearly 600 MMcf/d of gas and 220,000 b/d of light crude, nearly double the size of the existing facilities.

Engineering, procurement and construction bids are due to be submitted at the end of February.

The tender is a welcome sign of progress, but even if contracts are awarded before the end of 2018, the new facilities will take at least three years to complete.

KOC can currently produce around 3.02 million b/d of crude. Its new EPF will increase this to 3.14 million b/d, while JGF-1 should take the total to 3.36 million b/d.

That still leaves it short of its 3.65 million b/d target.

Delays to developing Kuwait's Jurassic gas resources, which should have been at 1 Bcf/d by last year already, have left the state dependent on LNG imports to fill its supply gap.

The 4 million b/d target has been repeatedly pushed back over the years, and many Kuwaiti sources privately concede they will need help from international oil companies to reach the goal at all.

So far, Kuwait has signed three enhanced technical service agreements with BP, Shell and Total to help boost output.