3 countries are competing for it.. Will the development of the Al-Durra field become a path to leadership in the Arabian Gulf?  (Report) - Energy

Read in this article

  • The development of the Al-Durra field is considered a pioneer in regional relations
  • The impact on the global gas and LNG market will be minimal
  • Kuwait, Saudi Arabia and Iran suffer from gas shortages and cannot meet their domestic needs
  • Saudi Arabia and Kuwait are continuing to develop the field, and Iran may pursue its own development plans

The development of the Dorra field is still a subject of great interest by Saudi Arabia, Kuwait and Iran, in light of the increasing need for gas and successive energy crises.

The writer Wayne Ackerman – in an article published by the Middle East Institute (MEI) – stressed that the development of the gas field is a pioneer in regional relations, more than it is related to the global liquefied natural gas market.

He indicated that the impact on the global gas and LNG market would be insignificant, given that any production in the domestic electricity and energy sector would be absorbed in any of the three countries.

Durra field discovery

The Dorra field is located in shallow waters offshore in the northern Persian Gulf, at the intersection of competing territorial claims by Kuwait, Iran and Saudi Arabia.

The gas field was discovered in the mid-1960s, at a time when maritime boundaries were not well defined, and gas was not considered a strategic asset.

Kuwait and Iran were granted overlapping maritime concessions due to undefined maritime boundaries, while Kuwait and Saudi Arabia developed a neutral zone, known as the Divided Neutral Zone, covering the land and sea border area, where all hydrocarbon fields would be jointly developed with the national oil companies.

In an effort to develop resources, Saudi Arabia and Kuwait agreed to demarcate the Neutral Zone and joint operations within it.

As the major oil producing countries focused on developing reserves in undisputed territories, the Dorra field was undeveloped.

The offshore sector in the divided neutral zone holds the giant Khafji oil field and the Dora gas field.

The importance of the Durra field

Estimates of resources in the field vary widely from 60 trillion cubic feet, to 10-13 trillion cubic feet, and 300 million barrels of oil.

Production estimates also vary, ranging from 800 million cubic feet per day, to one billion cubic feet per day, and 84,000 barrels per day.

Author Wayne Ackerman noted that Kuwait has an urgent need for domestic gas resources, so developing Al-Durra would rank higher on its list of priorities than Iran or Saudi Arabia, both of which have local resources to exploit.

However, Al-Durra is a regional concern for Saudi Arabia and Iran because both will seek to protect what they consider to be their legitimate “resources,” Ackermann emphasized in his article.

For Kuwait, the stakes are high, splitting the 1 billion cubic feet per day production by 50% would provide more than 12% of the total 4 billion cubic feet per day the country is expected to need by 2030.

For Saudi Arabia, an additional 500 million cubic feet would add only 3% to the current daily gas volumes.

As for Iran, assuming participation and exploitation, the addition to its total production is less than that, because any production from Al-Durra is dwarfed by the giant Pars field.

However, the writer stressed that the three countries suffer from a shortage of gas, and cannot meet their domestic needs.

Al-Durra natural gas field

Continuous development efforts

Ackerman explained that official discussions about the development of the Dorra field have always been difficult, as both Saudi Arabia and Kuwait have sought to exploit the resources according to their respective timelines, needs, and strategies.

The development of oil fields remained the focus of governments, as the onshore Wafra field, the Hawt field and the offshore Khafji field are still under development, while the exploitation of Al-Durra has not been addressed.

In the early 2000s, with the two countries’ increasing demand for gas, discussions between Saudi Arabia and Kuwait over the joint development of the Dorra field resumed.

In 2013, both countries halted negotiations due to differences in pipeline routes and gas production sharing.

In the subsequent years, 2014-2015, continued divergence in operating philosophies led to disputes, which eventually led to the suspension of oil production from the Neutral Zone fields, and plans to develop Al-Durra stalled again.

By then, both countries had begun to see the value of gas as demand grew strongly, and both wanted to capture volumes to meet their growing domestic needs.

Kuwait, as it lacks gas, developed a terminal to import liquefied natural gas and purchase liquefied natural gas from the global market.

For a major hydrocarbon producer, relying on imported gas since 2008 to supply domestic needs has been a difficult decision for the government.

For their part, the Saudis resorted to their local resource base and sought to develop unconventional gas resources – such as the Jafurah field – while supplementing their internal electricity needs with liquids.

Renewal of bilateral cooperation

In late 2019, Saudi Arabia and Kuwait agreed to resume production from the Neutral Zone fields, which was an indication that broader talks could resume at the Dorra field.

In late 2020, both countries announced that they would appoint a single technical advisor to review and evaluate the field’s development plan, production prospects, storage options, development costs, and determine each country’s gas quota.

Ackerman clarified that it remains to be seen whether Kuwait and Saudi Arabia can develop mutual trust for technical cooperation and develop the Al-Durra field commercially.

Interestingly, the two countries usually adhere to a simple geographical understanding: the fields in the northern sector of the Neutral Zone are administered by Kuwait, while the fields in the southern sector are administered by Saudi Arabia, the article said.

The Al-Durra field is located in the northern sector, so Kuwait may push for operation. However, the technical expertise to develop a complex, liquid-rich gas field with an oil edge rests with the Saudis.

Although Saudi Arabia and Kuwait have announced their desire to participate in the development of the field, they still need to negotiate several agreements, before jointly formulating a plan to develop the field.

With current supply chain issues and bottlenecks, the development schedule could push any first production toward the end of the decade later, and if Kuwait and Saudi Arabia rely on local companies to develop and produce the field, the first production date will be longer.

Iranian allegations

Iran claims to own part of the field, and while the maritime boundaries are not defined, and are agreed upon by all parties, Kuwait and Saudi Arabia have reached a mutual understanding with the demarcation of the borders of the Divided Neutral Zone.

There was no agreement on the international borders or the eastern borders of the region, which demarcate the borders of Kuwait and Iran and the borders of Saudi Arabia and Iran.

Kuwait and Iran have at times engaged in discussions about their shared maritime border, but no formal agreements have ever been reached.

Saudi Arabia and Iran also held talks, but according to press reports, these talks have been sporadic and inconsistent, with little to no results so far.

Several recent press statements indicate that Saudi Arabia and Kuwait intend to move forward with the development of the Dorra field.

Both countries, as one negotiating entity, have invited the Iranians to participate in the discussions, and so far, the Iranians have rejected the offer.

The writer indicated that it is unlikely that substantive talks will occur, if the Saudi-Kuwaiti project continues to develop the field.

He added that he can expect some Iranians to press ahead with their development plans, as they seek to grab what they consider their share of reserves.

He believed that the development of Al-Durra may progress along the lines of the development of the Pars field and the North Field, as Iran and Qatar are exploiting the field independently for the benefit of stakeholders rather than maximizing the recovery of the field.

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