Nexen Yemen Production Down, Prospects Dim
True, the advantage Yemen had was low production costs compared to other producers, but heightened risk in the weak market and failing production aren’t going to generate much interest. Prospectivity is a neat word though.
Yemen Changes Tack In Bid To Lure IOCs
Energy Intelligence Group, Inc.Following a failed offshore licensing round last year, Sanaa modified its legislation in January to allow one-on-one negotiations with international oil companies (IOCs) in its latest attempt to attract big names and new technology (PIW Mar.2,p7). “There is a suggestion from the new oil minister to the cabinet to welcome the largest oil companies,” Yemeni Deputy Oil Minister Abdulmalik Alama told PIW. He said the fall in oil prices and problems securing finance had prompted the return to direct negotiations, which used to produce agreements within weeks, but which lacked transparency. The country had three successful bid rounds between 2004 and 2006, but the 11 offshore blocks offered in 2007 resulted in bids from only three small oil firms, despite international road shows and the short-listing of 25 high-profile bidders, including Exxon Mobil….
Direct negotiations alone are unlikely to be enough to bring in the majors, industry sources say, since other risk elements remain — onshore, lack of prospectivity, and offshore, lack of data — in addition to the lower oil price environment and security threats from tribes and militants. Direct negotiations meant there was less risk of being undercut by lower bids from less technologically adept companies, Yemen-based IOC sources said, but reduced transparency could undermine the whole process. Alama insists that offshore exploration remains economic at prices below $50 per barrel, noting that certain structures are relatively shallow and that, historically, onshore production has cost less than $10/bbl. Nonetheless, lower prices mean even the country’s best-established producers are under pressure…
Overall oil output has fallen below 300,000 barrels per day this year, down from 380,000 b/d in 2006. Canada’s Nexen, the country’s largest foreign producer, predicts that its output from Block 14 could drop below 30,000 b/d by 2012 from a peak of 230,000 b/d five years ago, while state Safer Exploration & Production Operations Co. has seen production fall to around 50,000 b/d from 70,000 b/d in 2005.
