Petsec increases interest in Block 7 offshore Yemen to 100%

Petsec has acquired Oil Search's 40% interest in Block 7.

Full announcement below.

Petsec Energy has completed the transaction with Oil Search to acquire all of the shares of its subsidiary Oil Search (ROY) Limited which holds a 40% working interest (34% participating interest) in the Al Barqa (Block 7) licence and operatorship, in the Republic of Yemen.

Completion of the Oil Search agreement follows the 2016 transaction with KUFPEC (25% working interest) to acquire their interests in Block 7, and the transactions with AWE (25% working interest) and Mitsui E&P Middle East (10% working interest) completed and approved by the Yemen Ministry of Oil and Minerals in 2014. The acquisition of Oil Search (ROY) Limited increases Petsec’s potential working interest in Block 7 to 100% and operatorship of the block.

Block 7 is an onshore exploration permit covering an area of 5,000 sq kms (1,235,527 acres) located approx. 340 kms East of Sana’a, 80 kms North East of the Company’s Damis (Block S-1) Production Licence, and 14 kms East of OMV’s Al Uqlah (Habban) Oilfield. The block contains the Al Meashar oil discovery made by Oil Search in 2010 as well as an inventory of nine prospects and leads defined by 2D and 3D seismic surveys, with target sizes ranging from 2 to 900 MMbbl oil gross.

The Al Meashar Oilfield, with a target resource of 11 MMbbl to 50 MMbbl, contains two suspended discovery wells that intersected over an 800 metre oil column which in 2010-11 delivered flow rates ranging from 200 to 1,000 bopd in short-term testing of the wells. The oil column extends over the same reservoir sequence as that of the Habban Oilfield in the adjacent Al Uqlah (Block S-2).

Petsec Energy has secured a 100% interest in two production and exploration licenses in the highly productive Shabwah Basin in Central Yemen, Blocks S-1 and 7, which contain six oil & gas fields – one developed and five yet to be developed, with cumulative target resources between 45 and 84 million barrels of oil and 550 billion cubic feet of gas, in addition to further high potential exploration targets.

Block 7 is a key addition to the Company providing material upside to Petsec’s existing Production Licence, Damis (Block S-1) acquired in February 2016 from Occidental Petroleum, which holds the developed An Nagyah Oilfield and four undeveloped oil and gas fields, containing substantial oil and gas resources in excess of 34 million barrels of oil and 550 billion cubic feet of gas. The developed AnNagyah Oilfield was estimated, based on limited production rates of 5,000 bopd for trucking purposes, by DeGolyer and MacNaughton, reserve engineers, to contain gross 2P reserves of 12.8 MMbbl, of which the financial net to Petsec Energy is 5.6 MMbbl of oil, having a NPV 10 of US$155.4 million based on January 2016 forward oil prices.

Petsec’s Chairman, Mr Terry Fern stated:

'We are pleased to have secured the acquisition of 100% of both Blocks 7 and S-1 so we can now concentrate on bringing these acquired oil and gas fields into production. This oil and gas production is critically important to the local Yemeni people to provide employment and revenues, absent since 2015 because of the country’s political issues. We were heartened by the recent welcome and encouragement we received from senior members of the Yemen Government currently based in Riyadh, Saudi Arabia, and hope this offered support will allow the early restart of production of the An Nagyah Oilfield, which will demonstrate to the World that foreign investment is welcome in Yemen, and will encourage other foreign oil companies to join us in rebuilding the Yemen oil industry. We look forward to working with the Ministry of Oil & Minerals in developing Yemen’s oil and gas industry.'

Read More

Gulf of Aden: Dire Straits

The Gulf of Aden is a strategically important shipping route linking the Mediterranean Sea and the Indian Ocean. The port city of Aden controls the Bab al-Mandab strait, the gateway between the Red Sea and Gulf of Aden through which 21,000 ships pass through each year. According to the EIA, 3.8mmbbl/d of crude oil and refined products passed through this route in 2013 alone.

The capture of Aden by the Houthis on 25 March 2015 was therefore a huge concern to the international community, with the US, Saudi Arabian and Egyptian navies stepping up its forces in the region. At the beginning of April, the Chinese were reported to be diverting vessels to the region as well.

At first glance, the involvement of Egypt is unexpected. Egypt had learned not to meddle in foreign affairs after its previous military intervention in Yemen in the 1960s led to the death of 26,000 Egyptian soldiers. Back then, Egypt's President Nasser saw that Yemen was going through what Egypt went through a decade earlier - a revolution against the monarchy, followed by what would be an installation of a republic. Nasser, a champion of pan-Arabism, lent his support to the Yemini republicans. However, what was expected to be a swift war turned into "Egypt's Vietnam" that lasted almost a decade.

One of Egypt's key sources of income is now at risk. The Suez Canal contributed over USD5 billion in tariffs in 2013 to Cairo's coffers, now under threat, means Egypt can no longer turn a blind eye to the developments in Yemen. More importantly for Egypt, its participation in Operation Decisive Storm, allows it to demonstrate its loyalty to the Gulf States which have contributed over USD20 billion of aid in funds and oil products to an ailing Egypt since the ousting of Mubarak in 2011.

However, it would be wise to remember that the Saudis and Egyptians were once on opposite sides of the battlefield in Yemen. The Egyptians had backed the republicans in the 1960s civil way, whereas the Saudis lent their support to the ruling Imam monarchy. Saudi Arabia's policy how not changed though - it and its Gulf allies understandably view the protection of the status quo a priority, i.e. protection from any threat against the ruling monarchies. In the 1960s, it was against Nasser's spread of revolutionary ideology. Since 2011, it has actively worked behind the scenes to undermine the Muslim Brotherhood in Egypt, a moderate religious political group which the Saudi's saw could garner popular support in the Gulf if left unchecked. In 2015, the Iranian backed Houthi movement on the Saudi border is the next, and possibly not the last, challenge to the Gulf ruling system.

Read More

Saleh: Enemies become allies

The Houthi movement was founded in the 1990s to revive a branch of Shia Islam known as Zaidism. Historically the Zaidis had ruled over North Yemen until their toppling in 1962 during the Yemen Civil War. Since then, they have been increasingly marginalised by the new regime which viewed Zaidism as a threat.

In the beginning, the Houthi movement was peaceful. It sought a voice in a regime where it was being opressed. It called for a partnership with President Saleh to work things out and not for his overthrow. However, the Houthis also saw the United States as an enemy of Islam and President Saleh’s alliance with the US on the “War on Terror” shaped the events that followed.

President Saleh was seen by the Houthis as a traitor; the Houthis were vocal in pushing for his ousting. In response, President Saleh stepped up efforts to repress the movement, including attacks on Houthi villages. The movement became increasingly military in order to defend itself with six wars being waged upon them by the Saleh Government between 2004 and 2010. The wars led to massive deaths in the Sadaa region, the stronghold of the Houthis, and had the effect of alienating much of the Northern Yemeni population.

The Arab Spring came at an opportune time for the Houthis who capitalised on the Yemeni’s discontent with the government and lack of progress on the economic and security fronts; the Houthis openly supported the protests against President Saleh. Following the removal of President Saleh, the Houthis stepped up as a candidate to fill the power vacuum and vowed to set up its own political party to participate in the country’s next elections. Support for the Houthis grew, although its appeal was probably less to do with its ideology and more of a common hatred against Saleh’s repressive regime.

The Houthis realised that in order to be heard and to make an impact, it would have to do so through the political arena which would legitimise the movement. However, it is now becoming evident that its extension into politics is part of a grander plan to gain governing and military dominance. Three years after the Arab Spring, Yemen’s interim government headed by President Hadi, had yet to make any noticeable improvements to the country. The Houthis saw this as the time to act and in 2014, launched an aggressive military campaign in the north of Yemen culminating in the capture of the capital Sanaa in September 2014. Government departments and the airport were seized and President Hadi was placed under house arrest. The capture of Sanaa was months, if not years in the planning. By mid 2014, the Houthi’s had already surrounded the capital and its final move into the city was executed at lightening speed.

The Houthi’s could not have achieved all this without military support. In a twist of events, this support is coming from ex-President Saleh, who once upon a time, aggressively tried to crush the Houthis during his reign. Saleh’s loyal followers, including those in the country’s army and security services have aided the advance of the Houthis, or in some cases actively chose not to protect against their advances. The Houthi alliance with Saleh is a strange one, but one that has allowed the former to widen and strengthen its grip and the latter to orchestrate the destruction of the new regime and the Hadi government, an act of revenge against those who overthrew him.  How long this alliance lasts, only time will tell, but probably for no longer than one needs the other.

Read More

Yemen: The Islamic Chessboard

Houthi take Sana (check), 

Saudi airstrike,

Next move...

Since the start of the year, the Houthis have risen to fame in the drama that is the Middle East. There was little media coverage of the group previously due to their modest beginnings, but also the difficulty of doing serious investigative journalism in Yemen (due to safety and security). However, the increasing threat of the Houthis is now taking centre stage and the international community is paying more attention.

Yemen: The Islamic Chessboard is a series examining the rise of the Houthis and the conflict in Yemen. For now, Yemen appears to be the battle ground in the continuing fight between the Shias and the Sunnis.

Read More

Notes on Yemen - Summary

Summary

• Oil production dominated by 2 blocks:
• Masila (Bloack 14)
• Licence expired in 2011
• Operations taken over by newly formed government op co
• May impact production levels and future development
• Marib-Jawf (Block 18)
• Production peaked in 2002 at 160mbopd
• Absent further discoveries, reserves will be depleted over next decade
• A number of licences are due to expire in coming years, if not renewed, could exacerbate declining reserves problem
• Small discoveries in basement formation by Total and OMV may help reduce decline in the immediate future
• Deteriorating security situation
• Attacks on Marib export pipeline means pipeline regularly non-operational
• Ongoing tensions between gov and local tribesmen
• Unrest will impact future production as troops previously assigned to guarding oil infra are relocated to cities
• In recent years, government has addressed declining revenue from oil by monetising gas
• Yemen LNG commissioned in 2009
• Fed by Total-led East Shabwa gas project
• Government also keen on moving away from heavily subsidised diesel power gen by incentivising gas on commercial terms
• Due to maturity, Yemen of interest to small/med cos
• Despite security concerns, attractive fiscal terms and rel low capex/opex mean attractive returns on investments can be made for those willing to accept risk

Read More