On February 27, Japan's Arabian Oil Co (AOC) gave up its rights to produce oil in Saudi Arabia, losing a 40-year-old drilling concession representing the country's premier upstream overseas oil interest.

Aramco for Gulf Operations (AGO), a subsidiary of Saudi Arabia's state oil giant Saudi Aramco, has taken over the concession. Failure to renew the venture after five years of negotiations between Riyadh and Tokyo will now force AOC to restructure and hurt Japan's hopes for a more self-sufficient oil industry, a security concern for the government. AOC, Japan's major offshore producer, will now bank completely on a Neutral Zone concession with Kuwait which expires in January 2003.

That venture is AOC's last remaining commercial offshore crude interest. "On the operational front, MEES learns that the venture's activities will now be carried out under a temporary 50-50 joint operating agreement between AGO and AOC, with the former representing the Saudi half-interest and the latter the Kuwaiti half-interest," said MEES. The newsletter said the takeover by AGO has not disrupted activities at the oil fields. "Moreover, no disruption is foreseen as regards export supplies of crude oil from the Neutral Zone offshore fields (Khafji and Hout) to term customers," it said.