"Official negotiations with the Kuwaiti side haven't even started yet... But practically speaking it is unlikely that a contract exactly the same as the one agreed 40 years ago would be signed," an AOC spokesman said.

He did not elaborate on the details of the existing contract.

AOC holds a concession in the Neutral Zone shared by Kuwait and Saudi Arabia.

The offshore concession represents Japan's premier upstream interest, with daily crude output of around 300,000 barrels.

The Saudi part of AOC's drilling rights is to expire in 2000, while the Kuwait part will come to an end in 2003.

Kuwaiti oil minister Sheikh Saud Nasser al-Sabah said on Tuesday that any renewal of AOC's drilling rights would be on a different basis as circumstances had changed since Kuwait first signed thedeal with AOC in 1958 and took part in the drilling venture in 1974.

The minister said: "The current situation with AOC is not acceptable."

The AOC spokesman said the company was in talks with Saudi Arabia for renewal of its drilling rights, and official talks with Kuwait would not start until negotiations with the world's largest oil supplier were settled.

AOC has a 40 percent stake in the drilling venture in the Neutral Zone, while the remainder is equally divided between Kuwait and Saudi Arabia.

The two countries each also have a 10.94 percent share in AOC.

Last October, a Kuwait Petroleum Corp (KPC) executive said Japanese investment in Kuwait and larger oil purchases would be the key to a successful renewal of the drilling rights.

KPC Managing Director Sheikha Sheikha Saad al-Abdulla al-Sabah also said in Tokyo that better job opportunities at AOC's plant in Khafji would be another important factor that could influence the outcome of the negotiations.

Of 1,800 workers at the AOC's plant inKhafji, about 1,270 are Saudi Arabian and some 250 are Kuwaiti.

Japan relies almost entirely on imports for its oil requirements, and Saudi Arabia and Kuwait are its second- and sixth-largest crude oil suppliers.