Kuwait to shut oil fields - Kuwait says one third of its output could be shut in case of war; OPEC may remove limits.
March 3, 2003: 1:16 PM EST
KUWAIT (Reuters) - Kuwait may have to shut down 700,000 barrels per day, or one third of total oil output, if war erupts on Iraq, intensifying fears markets could be short of more than just Iraqi supplies during a conflict.
Two production hikes already this year have left OPEC with just enough spare capacity to cover a potential disruption in Iraqi exports of close to two million barrels per day (bpd).
Even a 400,000 bpd outage from Kuwait could stretch the cartel beyond its capacity and might necessitate the release of emergency petroleum reserves from major consuming countries.
The state Kuwait Oil Co said it would shut its northern oilfields near the border with Iraq as a safety precaution, closing 400,000 bpd of Kuwait's 2.1 million bpd. It also said the 300,000 bpd western Manakish oilfield might be closed.
"Kuwait will close all its northern oilfields when a possible war starts to safeguard the workers in these fields," KOC Chairman Ahmad Rashid al-Arbid told the official Kuwait News Agency.
Arbid said Kuwait would try to cover the shortage from other western and southern oilfields. The Gulf producer has already closed two small northern oilfields -- totalling 25,000 bpd.
For its part, OPEC sought to assure markets it would remove supply limits and pump flat out if a U.S.-led war were to halt oil exports from Iraq, the world's eighth largest exporter.
Asked in a BBC interview broadcast Monday whether OPEC would remove its production ceiling if war were to disrupt Iraqi oil supplies, OPEC President Abdullah al-Attiyah said: "Yes. If there is a shortage and the world needs more oil, we will do it...We will pump maximum capacity if the market needs it." Contingency plans
The cartel is likely at its March 11 meeting to set up a war contingency plan to suspend quotas once hostilities start. OPEC temporarily abandoned output limits shortly after Iraq invaded Kuwait in August 1990 to cover outages from the two producers.
Kuwait was swift to lend its support to a suspension of OPEC's ceiling -- lifted twice already this year to cover a shortfall from strike-bound member Venezuela.
"Whatever OPEC will decide, Kuwait will cooperate," Kuwaiti Oil Minister Sheikh Ahmad al-Fahd al-Sabah told Reuters.
In any case, most analysts say OPEC has few extra barrels to dispense -- little more than Iraq's 1.7 million bpd of exports.
With only Saudi Arabia holding substantial spare volume, actual cartel supplies will depend on how much more Riyadh decides to pump.
The kingdom, the world's biggest oil exporter, is already producing just over nine million bpd, and stands ready to pump to its 10.5 million bpd capacity.
If OPEC has insufficient spare capacity, consumer countries represented by the Paris-based International Energy Agency have said they will release emergency strategic reserves for the first time since the 1991 Gulf War.
The price of oil was lower in London trading Monday morning, as a barrel of Brent crude for May delivery was off 47 cents to $31.35.