Japan's Arabian Oil Co. has started finalizing deals with Kuwaiti officials on drilling rights in the Khafji oil field, reported the official Iranian news agency, IRNA, citing industry sources.
The major Japanese oil producer is aiming at reaching agreements with the Kuwaiti government over extending the rights in the oil field by Thursday, the deadline for the ongoing negotiations, they said.
Arabian Oil will likely drill in the oil field in Khafji on behalf of the Kuwaiti government, instead of owning concessions for the drilling, and receive commission fees from the Kuwaiti side under a “technical service contract,” they said.
The Japanese side wants a stable supply of crude oil as a precondition to signing the contract. Arabian Oil is therefore hoping to ink a separate deal for receiving crude oil during drilling.
The current contract between Arabian Oil and Kuwait, which will expire in January 2003, is a comprehensive one in which the oil company owns nearly all rights, from drilling to the disposal of crude oil.
Kuwait wants to change the current contract to a service agreement under which the government would let Arabian Oil handle drilling.
While Kuwait intends to develop oil fields in cooperation with foreign developers, its Parliament wants the country to promote development by itself under the Kuwaiti Constitution, which says natural resources belong to the state.
Thus, Arabian Oil has decided to separate the rights to procure crude oil from the contract so the company does not appear to own the oil field, the sources said.
But a rocky road may be ahead for the negotiations, as a wide gap remains between the two parties. Arabian Oil is insisting on a long-term contract, such as 10 years, while Kuwait wants a shorter one, the sources said.
They added that Kuwait is believed to be postponing signing the procurement rights deal with the Japanese side – Albawaba.com
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