Japan's Arabian Oil Co Ltd said yesterday that it had signed a memorandum with Kuwait in which the two parties agreed to try to conclude oil talks on AOC's future role in the Neutral Zone by January 29, 2002.

It said in a news release that the agreement was signed between AOC President Keiichi Konaga and Kuwaiti Oil Minister Adel Al-Subaih yesterday.

It said the two parties will hold talks based on non-binding principles agreed upon in first phase negotiations.

Earlier this month, a senior Kuwaiti official told Reuters that the second phase of talks had started, and that Kuwait planned to end talks by late January.

The Japanese firm's concession in the Neutral Zone between Kuwait and Saudi Arabia will expire in January 2003.

The Japanese firm had initially been hoping to renew its concession in the Kuwaiti portion of the Neutral Zone or have a bigger stake in operations there.

But Kuwait said the existing deal could not be renewed as the constitution bans production sharing and foreign ownership of natural resources like hydrocarbons.

The new deal focuses on AOC providing technical assistance and soft loans for operations in the zone and a long-term Kuwaiti oil deal.

AOC lost its oil concession in the Saudi portion of the Neutral Zone in February 2000 due to differences on terms and the kingdom's insistence on Japanese investments.