Yemen to Offer 15 Hydrocarbon Blocks for Exploration Contracts in October

Source: Bloomberg , By Mohammed Hatem
05/09/2010
Yemen plans to offer next month the rights to develop 15 offshore hydrocarbon blocks as the smallest producer on the Arabian Peninsula seeks to boost production, Oil Minister Amir al-Aidarous said.

“Expanding explorations is one of the priorities of the government,” al-Aidarous said in an interview in Sana’a on Sept. 1. Yemen will offer the blocks to international companies during a two-day conference in Sana’a in October, he said.

Yemen, which relies on oil for 75 percent of its income, is looking to attract foreign expertise to revive falling production. The country’s crude output declined to 288,000 barrels a day last year from as much as 440,000 barrels a day in 2001, according to U.S. Energy Department data.

A lack of exploration activity over the last ten years caused the production drop, al-Aidarous said. “There is a decline not because of the non-availability of oil, but because of the absence of an exploration vision.”

Yemen postponed a fourth bidding round for 11 offshore oil blocks in August 2009 in part due to international concerns regarding security in the Gulf of Aden and higher insurance rates, the U.S. Energy Information Administration said on its website, citing the Yemen Times.

Security Concern

The impoverished Arabian Peninsula nation has become a base for al-Qaeda as the terrorist group comes under pressure in Pakistan and Afghanistan, raising concerns about security. Al- Qaeda’s Yemen-based branch, which tried to blow up a U.S. airliner in December, stepped up violence since June, killing dozens of security personnel in raids in southern cities.

Security forces battled al-Qaeda militants for days in August in the southern city of Loder before flushing them out. The army began the assault on the city after 11 soldiers died in an ambush by militants on Aug. 20.

“I understand that security is a big concern,” al- Aidarous said. “The oil sector has continued to operate without trouble. Some companies have been producing oil for over 20 years without stopping for a single day.”

Hunt Oil Co. operates a 10,000 barrel-a-day refinery in Marib. Total SA, Europe’s third-biggest oil company, bought in June a 36 percent stake in the Block 72 production-sharing agreement in Yemen. Korea Gas Corp. also owns 6 percent of Yemen LNG Co.

Yemen’s government hasn’t yet reached an agreement with Korea Gas to increase the price at which it buys liquefied natural gas from Yemen LNG, al-Aidarous said in the interview.

“We are taking political and diplomatic moves to exercise pressure on Korea Gas to improve the set price, which is unfair as prices of gas in the market have tripled,” al-Aidarous said. The 20-year contract with Korea Gas states that Yemen has the right to change the price every five years, he said.

Yemen’s President Ali Abdullah Saleh ordered a review of contracts signed between Yemen LNG and its customers to try to bring them into line with current gas prices, the official Saba news agency reported on June 15.