November 11, 2023 [S&P Global]- Chevron, which operates the Wafra field in the Neutral Zone shared by Saudi Arabia and Kuwait, will move its headquarters to Khafji as part of the agreement reached by the two countries to restart production in 2020.

The company is currently in the middle of moving its headquarters as well as vital infrastructure including tank farms, facilities to Khafji, a source close to the development told S&P Global Commodity Insights Oct. 30.

Restoring production capacity in the zone, which comprises the Wafra field and Khafji oil fields operated by Chevron and Aramco Gulf Operations Company respectively, is likely to take some time given the massive infrastructure overhaul required, the source added.

Saudi Arabia and Kuwait — which originally agreed in 1970 to co-manage and share crude production from the zone equally — have been looking to boost output and production capacity in the area, also known as the Divided Zone, following the resumption of work in the area.

The challenges of raising output from Wafra are compounded by the ongoing transfer of facilities to the Khafji operational area, as part of the agreement reached by Saudi Arabia and Kuwait to resume operations.

“Our efforts are focused on transforming our facilities to have farm tanks and pipelines,” he said.

Under the agreement, all facilities must be moved to Khafji within five years. However, two years have already elapsed without significant development, the source said, citing the need to build schools, hospitals, pipelines, storage tanks and perhaps even an export terminal.

Restoration of production capacity to 500,000-600,000 b/d can “only happen after five years”, the source added.

Crude output from the Neutral Zone is around half of the approximately 500,000 b/d it averaged prior to a dispute between the two countries which resulted in a shut-in of production between 2015 and 2020.

A source with knowledge of Neutral Zone operations said overall production could hit 300,000 b/d by the end of next year. Exports from the Neutral Zone reached a high of 272,000 b/d in March this year, according to S&P Global Commodities at Sea data.

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