Nexen to exit Masila oilfield in Yemen

Wed Nov 23, 2011 4:38pm EST
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By Humeyra Pamuk

DUBAI (Reuters) - Nexen Inc confirmed on Wednesday that it will exit Yemen's Masila oilfield, the troubled Arab country's largest, after the government refused to renew its operating license.

The urgent need by Yemen for more cash, as well as political turmoil in the impoverished country, were expected to hinder Nexen's efforts to renew the license for another five years.

Canada's sixth-largest independent oil producer said it was told by the government of Yemen that its bid to extend the production sharing agreement (PSA) on Block 14 at Masila had not been accepted and the block would be operated by a Yemeni company once the PSA expired on December 17.

"The Yemeni cabinet yesterday informed us of the creation of a committee that would head up the transition from their side and we will respond to their request," said Nexen spokesman Pierre Alvarez.

Over the weekend, Yemen's state news agency reported the setting up of a new state-owned oil company to be called PetroMasila, which will replace Nexen in Block 14.

The block held Yemen's largest proven oil reserves as of end-2010, according to its Petroleum Exploration and Production Authority (PEPA).

Nexen was producing 35,000 barrels a day from the field, which in total pumps around 70,000 bpd and exports the bulk of the output through the Ash Shihr terminal on the south coast.

Nexen's share for 2011 production is expected to be about 24,000 bpd to 28,000 bpd, the company said, adding that after royalties this was to drop to 14,000 bpd to 16,000 bpd.   Continued...