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A Saudi-Kuwaiti oil joint venture received bids for offshore and onshore gas facilities at Hout, one of the oil fields shared by the two OPEC members.

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Al-Khafji Joint Operations Co (KJO) received the bids in early June. KJO was set up by Aramco Gulf Operations, a subsidiary of state oil firm Saudi Aramco, and Kuwait Gulf Oil Co (KGOC).

The two share the al-Khafji, Lulu, Hout and Dorra fields, which are located in the Neutral Zone between Saudi Arabia and Kuwait. Three sources have said the project would cost around US$500mn, while a fourth source pegged it at US$900mn, reported Reuters.

The winning firm will build offshore gas gathering facilities, pipelines and onshore gas facilities. The project would help recover the associated gas, which is now being flared.

International firms have the option to submit a combined proposal which would help reduce the cost of the project. Khafji, located in the Neutral Zone between Kuwait and Saudi Arabia, has an oil capacity of around 610,000 bpd.

Plugging the gap

Tight supply has been exacerbated by Saudi Arabia's and Kuwait's adherence to OPEC's oil output curbs since December 2008.

Kuwait is plugging the gap between supply and demand with imports of liquefied natural gas (LNG) while the world's largest oil exporter, Saudi Arabia has stepped up its exploration for gas after it completed a massive crude expansion programme in 2009.