But Sheikh Saud Nasser al-Sabah reiterated that on-going talks with large foreign oil companies did not include production sharing agreements as the country's constitution banned it.

"We must grant them a role and make them participate in operations," Sheikh Saud told Reuters but he stressed the talks were centering around "operating service agreements".

"We have had extensive discussions (with the majors) and will respond to their proposals by September or October and finalise the concept," he said.

International hopes for a role in Kuwait's upstream operations, including oil fields close to the northern border with former occupier Iraq, were renewed last year when the Supreme Petroleum Council (SPC) gave approval in principle to foreign participation.

The SPC is the highest oil policy decision making body in the country wherethe production of a barrel of oil costs slightly less than $1. At current production levels of around 2.0 million barrels daily, Kuwait's oil reserves would last more than 100 years.

When asked if this time, Kuwait, which controls almost 10 per cent of the worlds oil reserves, would grant foreign firms a role although the SPC had twice before -- in 1993 and 1995 -- gave a similar approval, Sheikh Saud said:

"By the end of this year we will have concluded everything, god willing...The minute we have an agreement we will go ahead."

Some of the worlds largest oil firms have been waiting in the wings for years with small technical agreements with Kuwait, waiting for the day the country opens its lucrative upstream operations.

The minister said world majors "are stepping over each other to enter Kuwait and we welcome them with our conditions" which experts said work around constitutional limitations.

"Let me stress again these are operational accords and not one single drop of oil will be tied up inproduction sharing... They (foreign firms) have presented good ideas and we have clear and unambiguous conditions.

"The concept is still not clear either for us or for them and we have to make it clear. They are used to production sharing" but the two sides are working on new formulae, added the minister who assumed office in March with a determination to shake up the fully state-controlled oil sector.

Kuwait had earlier announced plans to raise its production capacity by one million barrels per day (bpd) early in the next century from a current 2.5 million bpd, a project which experts say requires foreign participation to secure needed technology.

The minister told Reuters that earlier comments might have been wrongly understood to mean Kuwait plans to delay the expansion due to the sharp drop in income with oil prices currently near to 10-year lows.

"There are no budgetary constraints, I have $10 billion in KPC to invest, what constraints? The expansion is on course. There are no delays," added theminister.

As minister, he heads KPC which has some 4.3 billion dinars ($14 billion) mainly invested in financial instruments and deposited with banks.

Kuwait's draft budget for the 1998/99 fiscal year which started July 1 carries a gross deficit of 2.163 billion dinars. Expenditure in the budget, which still requires parliamentary approval, was put at 4.362 billion dinars.