The contested Arash/Durra gas field: An opportunity for Persian Gulf energy diplomacy

Mohammad Salami, The Cradle, July 20, 2023 —

The gas field dispute between Iran, Kuwait, and Saudi Arabia showcases a complex interplay of West Asian geopolitics and national pride, but it also offers Persian Gulf states a unique opportunity to resolve an important maritime conflict independent of external interference.

The Persian Gulf is home to numerous joint gas and oil fields that have often been a source of contention among states, whether it be disputes over ownership or the manner in which joint extraction is implemented. Among these fields is the renowned ‘Durra’ in Kuwait and Saudi Arabia – or ‘Arash’ as it is known in Iran – which has remained a subject of disagreement between the three countries since its discovery in 1967.

While part of the Arash/Durra joint gas field lies within Iran’s territorial waters, both Riyadh and Kuwait dispute Iran’s claim and deny any ownership rights. The primary source of disagreement between the states revolves around the absence of demarcated maritime borders.

The roots of the dispute can be traced back to the 1960s when Iran and Kuwait granted offshore concessions to the Anglo-Iranian Oil Company (now British Petroleum) and Royal Dutch Shell, respectively. The overlapping concessions in the northern section of the field, estimated to hold recoverable gas reserves of approximately 220 billion cubic meters (seven trillion cubic feet), sparked the initial conflict.

Sovereignty and resources clash

Efforts to resolve the dispute through negotiations between Iran and Kuwait have been ongoing for years, but a mutually agreeable solution has remained elusive. In 2001, Iran deployed offshore drilling equipment in an attempt to encourage cooperation and nudge forth an agreement for joint extraction. However, Kuwait’s opposition led to Iran’s withdrawal from the area.

In comparison to talks with Tehran, the negotiations between Gulf Coorporation Council (GCC) member states Kuwait and Saudi Arabia over the joint field, situated in the neutral zone between the two neighbors, have been less contentious.

Despite a temporary halt in 2013, Riyadh and Kuwait eventually reached an agreement in 2022 to jointly operate the gas field. However, Iran’s absence from the negotiations and the final Kuwaiti-Saudi bilateral agreement was strongly condemned by the spokesperson of the Iranian Foreign Ministry, Saeed Khatibzadeh, who deemed it “illegal.”

Tensions surrounding the Arash/Durra field reignited last month, with the Head of the National Iranian Oil Company (NIOC), Mohsen Khojastehmehr, declaring Iran’s readiness to commence drilling operations in the joint gas field. Prior to this announcement, NIOC had prioritized the development of joint oil and gas fields, with preliminary studies and seismic surveys of the Arash/Durra field already completed.

Following this, the Kuwaiti Oil Minister, Saad al-Barrak, firmly rejected Iran’s claim over the gas field, deeming it a violation of the fundamental principles of international relations, and urged Iran to engage in negotiations to establish clear maritime borders.

The “maritime area where Durra offshore field lies is part of the State of Kuwait’s sea territories, and the natural resources therein are shared between Kuwait and Saudi Arabia,” a source close to Kuwait’s Foreign Ministry was quoted as saying at the time.

A day later, on 5 July, Saudi Arabia reiterated Kuwait’s claim and invited Iran to delimit its maritime borders. The Arash/Durra field is jointly owned by “the Kingdom of Saudi Arabia and the State of Kuwait only, and they alone have full sovereign rights to exploit the wealth in that region.”

Why is this gas field important?

The Arash/Durra joint gas field is projected to produce an impressive 1 billion cubic feet of gas per day (bcfd), equivalent to 84,000 barrels of Natural-gas condensate per day. This makes the field crucial for all three countries involved, including Iran. Despite having the world’s second-largest proven gas reserves after Russia, Iran has been unable to utilize its full capacity due to enduring, unilateral US sanctions.

Iran has high expectations for its joint energy fields. While the country is rich in natural gas resources, it faces challenges on its domestic consumption front. In terms of exports, Iran has thus far only been able to send gas to Turkiye and Iraq. Tehran’s gas pipeline project to Pakistan and India, despite its implementation, has encountered hurdles due to US pressure, leading Islamabad to stall on its commitments. An Iranian gas export project to Oman also remains uncertain.

In addition, Iran imports gas from Turkmenistan for its domestic market, and has been unable to pay its debts to the latter due to financial sanctions, resulting in gas cuts and pressure drops in northeastern Iranian cities.

Despite boasting approximately 18 percent of global natural gas reserves, Iran ranks fourth in natural gas consumption in the world (after the US, Russia, and China) and consumes about 5.5 percent of the total global consumption, a number that continues to rise each year.

During the previous winter, several Iranian cities experienced gas shortages, leading to the oil minister apologizing to the public. In December 2021, Iran’s natural gas consumption reached approximately 23.329 bcfd, a significant increase of over 60 percent compared to the country’s 2010 consumption of 14.00 bcfd.

On the production front, Kuwait faces more challenges than Saudi Arabia and Iran. Although rich in oil, Kuwait depends on gas imports to meet its domestic consumption needs. In 2021, Kuwait inaugurated its first liquefied natural gas (LNG) import facility, capable of handling 22 million tons per year. As of 2020, Kuwait’s proven natural gas reserves stood at 59.9 trillion cubic feet (tcf), with production (0.53 tcf) falling short of consumption (0.73 tcf).

For a major hydrocarbon producer like Kuwait, relying on imported gas since 2008 to fulfill domestic needs presents a difficult conundrum for the government. Gas demand forecasts indicate that Kuwait will require 4.0 bcfd by 2030 to meet its internal requirements.

Riyadh also needs to increase gas production for two primary reasons: For the Saudis to join the ranks of gas-exporting countries, and to replace heavy fuel oil used in power generation with cleaner gas alternatives. Currently, the country consumes at least 500,000 barrels per day (bpd) of heavy fuel oil for power generation.

According to a December 2019 report from the King Abdullah Petroleum Studies and Research Center, domestic demand for natural gas is projected to grow by 3.7 percent annually from 2017 to 2030. To fulfill the strategic objectives outlined in the kingdom’s Vision 2030, gas output will need to increase by an average of 6.6 percent per year in the decade leading to 2030, driven by rising power and industrial needs.

Balancing ideals and material gains

In recent times, Iran has been contemplating new strategies for tapping into its joint energy fields with neighboring countries. Remarkably, these joint fields house a significant portion of Iran’s valuable resources, encompassing 20 percent of its oil reserves and 30 percent of its natural gas, including the extensive South Pars/North Dome Gas-Condensate field shared with Qatar.

As a sovereign state with strong revolutionary ideals, Iran prioritizes independence over mere material gains. The people of Iran prize independence as a sacred principle, making the competition with Qatar in the South Pars field a matter of national pride and legitimacy.

Despite Saudi Arabia’s actions in the disputed gas field, Iran’s determination to maintain its claim remains unwavering. As Iranians tilt eastward in a thrust for even more financial, economic, and political independence, it is unlikely that the Islamic Republic will abandon its national interests, and prompt them to assert their rights over resources shared with Riyadh and Kuwait. While geopolitical power struggles persist in West Asia, pursuing the dispute and resorting to international arbitration may not offer a practical solution, as Iran seeks tangible outcomes rather than lengthy legal processes.

On 4 May, Iran’s Economy Minister visited the kingdom to negotiate over the joint field, an effort that yielded little progress when Saudi officials denied any shared field with Iran. This will only lead Iran to launch its own plans for drilling operations in its part of the field.

Regional independence in resolution

In the Persian Gulf, the determination of maritime boundaries tends to get held up because of political issues than technical and legal ones.  It involves complex factors such as mutual mistrust, divisive military alliances, the prospect of discovering new energy sources that will create further disputes, and the influence of external powers in the region.

Of course, this is not impossible, as Saudi Arabia and Iran defined their maritime borders in 1698, but it is unlikely to happen in the short term and only because of Arash/Durra gas field.

However, reaching a tripartite compromise for joint exploitation, without delineating borders and based on established international models, could be a feasible solution to this stalemate. A similar approach was undertaken in the US-mediated agreement between Lebanon and Israel for the Qana gas prospect, where costs and revenues were shared without compromising territorial sovereignty. Such “joint development areas” have sometimes been viable solutions to other disputed petroleum-rich maritime areas, particularly in the complicated archipelagos of Southeast Asia.

Earlier in March 2022, Iran’s Deputy Oil Minister for International Affairs Ahmad Asadzadeh said “Even if the border is not demarcated, the field can be developed jointly using internationally tested models.”

Kuwait, which is today highly in need of gas resources, might be more amenable to such a compromise. The Arash/Dorra field represents an opportunity for energy resource exploitation for Kuwait, while Saudi Arabia perceives it as a territorial dispute that could shape future policy foundations.

Despite regional disputes, the Arash/Durra gas field serves as a test case for regional countries to resolve their issues independently. By adopting a logical and cooperative approach, it can underscore that West Asia’s problems can be addressed without the interference of external powers, especially amidst the reconciliation efforts between Iran and Saudi Arabia, and between Syria and the Arab League states.

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