Kuwait and Saudi Arabia are on track to boost oil output capacity in the shared Neutral Zone between the two countries by 50,000 barrels a day by 2009, a Kuwaiti official said.

This would come entirely from the offshore area, taking the total capacity for the zone to around 624,000 bpd from 574,000 bpd, said Bader al-Khashti, managing director of Kuwait Gulf Oil Company. KGOC is the operator on Kuwait's side of the zone.

New wells had been drilled in the offshore area and new pumps installed in subsea wells to raise capacity, he added.

Current output capacity in the offshore area of the zone stood at around 300,000 bpd, while the onshore area had capacity of around 274,000 barrels per day, Khashti said.

In the onshore area, US oil major Chevron Corp was going ahead with a large project to use steam injection to increase heavy oil output after the successful completion of a pilot project.

If the larger scheme is successful, Kuwait and Saudi Arabia will use the technique across the whole Neutral Zone, he said. This could increase the recovery rate of heavy oil to 40 percent from a current 5 percent and would give a further boost to output capacity, he said, declining to say by how much.

Khashti said he expected an oil concession run by the Saudi unit of Chevron in the Saudi sector of the Neutral Zone to be renewed when it expires in 2009, but added that development plans would go ahead whether or not it was renewed.

The 60-year concession was first granted to the U.S. Getty Oil Company in 1949. Texaco acquired Getty Oil in 1984 and Chevron took over Texaco in 2001.

The concession survived the nationalisation of the Saudi oil industry in the 1970s. Since then, Saudi reserves of 264 billion barrels -- over a fifth of the world's proven oil reserves -- have been off limits to international oil companies.

Saudi Arabia and Kuwait share estimated output of around 550,000 bpd from the Neutral Zone, a region between Saudi Arabia and Kuwait that dates back to 1920s treaties to establish regional borders.

Kuwait also hopes to have a development plan in place for the Kuwait and Saudi sectors of the massive Dorra gas field by the end of the year after it completes a seismic survey, Khashti said. Kuwait said in January it hoped to resolve soon a maritime border dispute with Iran that has blocked development of the offshore field.

The Dorra field lies on the Gulf continental shelf between Opec producers Kuwait, Saudi Arabia and Iran. Riyadh and Kuwait reached a deal on their part of the maritime border in 2000 but the area has remained a point of dispute between Kuwait and Iran since the 1960s.

Kuwait desperately needs gas for power production as it faces blackouts during the peak summer season. It plans to begin importing liquefied natural gas in 2009. - Reuters