VIENNA – Kuwaiti Oil Minister Adel al-Subaih said Tuesday that a new contract being drafted for Arabian Oil Co. will give the Japanese firm the rights to operate but not to own the concession to its oil fields.
Renewing drilling rights in Kuwait has become crucial for the Tokyo-based oil firm because it lost similar rights in Saudi Arabia in February 2000.
Kuwait hopes to strike a deal with Arabian Oil but is prepared to exercise the option of drilling the oil fields on its own if negotiations collapse, al-Subaih said.
Speaking to reporters in Vienna on the sidelines of a meeting of the Organization of Petroleum Exporting Countries, the Kuwaiti minister said the new contract would be completely different in form from the current one, which expires in January 2003.
Al-Subaih said the Kuwaiti government hopes to reach an agreement with the Japanese government-backed oil firm, which has held the concession to drill in Kuwaiti oil fields since 1958.
The first round of high-level negotiations is expected to take place within the next 10 days, al-Subaih said.
The operational rights envisioned by Kuwait include technical assistance from Arabian Oil, financial investment and long-term sales, he said.
Al-Subaih said contract negotiations would be held exclusively with the Japanese firm and would not involve any European or U.S. partners.
The Kuwaiti-controlled portion of the Khafji oil field produces 270,000 barrels of crude oil per day, and is one of the largest being exploited by a Japanese oil firm.
Japan on Wednesday welcomed a Kuwaiti government decision to give Japanese government-backed Arabian Oil Co. operational rights in the oil-producing country.
Officials at the Ministry of Economy, Trade and Industry said the decision will enable Tokyo to secure oil, and trade minister Takeo Hiranuma said in Shanghai that he welcomes the decision because the oil supply to Japan will continue.
The ministry officials said Tokyo is ready to support Arabian Oil in reaching an early agreement with Kuwait on renewing a drilling contract.
Japan is not surprised that Kuwait plans to give the Arabian Oil only operational rights, because Kuwait has revised its constitution in order not to give oil-exploitation rights to foreign firms.
Hiranuma said he hopes to visit the Middle East, including Kuwait, after the current Diet session ends in late June.
Arabian Oil said it aims to raise profits through the operations in Kuwait despite possible changes in the contract.
Renewing the drilling contract in Kuwait is crucial for Arabian Oil because it lost similar rights in Saudi Arabia in February last year. The firm has held the drilling concession in Kuwaiti oil fields since 1958. The current contract is due to expire in January 2003.
Financial markets assessed the company’s future earnings capacity severely. Arabian Oil’s share price on the Tokyo Stock Exchange finished the Wednesday morning session at 1,122 yen, down 67 yen, or 5.63 percent, from its Tuesday close.
Unfazed by OPEC
Japan’s oil industry expects no major market reaction to Tuesday’s decision by OPEC to keep crude output unchanged, industry sources said Wednesday.
The decision, made at an OPEC ministerial session in Vienna, came a day after Iraq suspended its crude exports under the U.N. oil-for-food program.
Nippon Mitsubishi Oil Corp. said it accepts the decision while the Petroleum Association of Japan commented, “OPEC’s decision reflects its policy to maintain the status quo until it assesses the situation.”
The crude price is expected to “move steadily at the present level, helped by the coming oil demand season in the United States,” according to a Nippon Mitsubishi Oil official.
OPEC said it will maintain the crude output by its 10 member states at 24.2 million barrels per day. The group is planning to meet again in early July to review the situation.
In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.