KUWAIT CITY, 15 December 2004 — Kuwait has agreed with Iraq to import up to 200 million cubic feet (5.6 million cubic meters) of Iraqi natural gas daily, in a deal eventually worth billions of dollars, a senior official said yesterday

A joint economic commission between the two neighbors approved a memorandum of understanding (MoU), which is expected to be signed by the two governments within a week, Kuwaiti Energy Ministry Undersecretary Issa Al-Oun told reporters after a meeting of the commission.

Oun, who heads the Kuwaiti side in the joint body, said the project, including the building of facilities and rehabilitation of a pipeline that will carry the gas, would cost 240 million Kuwaiti dinars (about $810 million). One month after signing the MoU, the two Arab countries will ink a commercial agreement to regulate the imports which are due to start within one year of signing the agreement, Oun said.

In the first phase, Kuwait will import some 35 million cubic feet (one million cubic meters) of Iraqi gas daily in a project estimated to cost $27 million of which the emirate will pay $20 million, the official said.

Details for the second phase will be discussed in a meeting three months from now, Oun said. It is estimated to cost $786 million of which Kuwait will pay $440 million and the rest will be paid by Iraq, he said.

The Iraqi gas will be bought at the market price, Oun said. Kuwait was receiving about 200 million cubic feet daily of gas from Iraq between 1986 and August 1990, when Iraqi troops invaded the emirate, through a 100-kilometer (60-mile) pipeline which has a capacity of 400 million cubic feet (about 11 million cubic meters) daily. There is a second pipeline for condensates. “The Iraqis are ready to deliver right now... At our end we have no problem,” Oun declared.

Kuwait, which is rich in oil but poor in natural gas resources, also agreed to increase its exports of refined products to Iraq to help the war-ravaged country cope with fuel shortages, Oun said.

The quantity of petrol will be raised from two million liters (440,000 gallons) daily now to three million liters daily from January 1 for six months, he said.

Kuwait will also export up to 1.5 million liters (330,000 gallons) of diesel daily in addition to 180,000 tons of liquefied petroleum gas (LPG) daily to Iraq until the end of June next year, Oun said.

The two countries have also agreed in principle to form a joint technical team to “control production” at the oil fields close to the borders which caused disputes between them before and after the invasion. “We are talking about the pattern of production... how to drill, understanding on the method of production and procedures,” Oun said.

The two sides however agreed to suspend studies on the possibility of establishing an oil pipeline to export about 250,000 barrels daily of Iraqi crude oil through Kuwaiti ports, Oun added. “We have told the Iraqis that we cannot accommodate their request because Kuwait needs the oil facilities... but we told them we can study their request in future expansion projects,” Oun said. Iraq is looking to diversify its oil export outlets especially after attacks by insurgents on the oil infrastructure.