Business

Nexen confirms Masila exit

National Yemen

Nexen chief executive Marvin Romanow

National Yemen

Canadian company Nexen has confirmed the Yemen government will not be renewing its production sharing agreement for Block 14 which contains the Masila oilfield.

The current PSA is due to expire on 17 December and Nexen said the government had rejected its application for an extension. As reported earlier this week the block will now be operated by a newly created national operating company, PetroMasila.

“While we’re disappointed we did not receive an extension, we’re proud of the accomplishments we’ve achieved there,” Nexen chief executive Marvin Romanow said.

“Our operations at Masila have generated significant value for our company, enabling us to deploy the cash flow to build our current portfolio of legacy assets.”

Nexen said the expiry of the PSA would not have an effect on its reserves as it did not book any barrels beyond the PSA term.

Output at the Masila field peaked in 2003 at 225,000 barrels of oil per day, while Nexen’s share of output in 2011 is expected to be between 24,000 and 28,000 bpd.

Nexen said the loss of production from Masila would be offset with the start-up of the Usan project, off West Africa, which is expected to begin production in the first half of 2012.

The company still has a PSA covering Block 51 in Yemen which contains the East Al-Hajar oilfield and expires in 2023.

Nexen’s net output from the field currently averages about 6000 to 8000 bpd and Nexen said it was currently evaluating alternatives with respect to Block 51 and its future activities in Yemen.

A chapter of Nexen’s history ended on November 22, 2011 with the announcement that the Yemen government did not accept our proposal to extend the Production Sharing Agreement (PSA) on Block 14 (Masila).

The announcement ends a relationship that began with a property evaluation in Yemen in January 1987 followed by first oil in Masila in September 1993 and will end on December 17, 2011, when the PSA expires. During that time, Nexen has produced more than one billion barrels of oil from the Masila block.

“We had a long and mutually-beneficial association with Yemen and its people,” said Marvin Romanow, Nexen’s President and CEO. “It was our first international investment, and its success has allowed Nexen to invest in future legacy assets such as Buzzard, Golden Eagle and Long Lake, assets that have and will continue to provide long-term growth for the company. While we’re disappointed we did not receive an extension, we’re proud of the accomplishments we’ve achieved in Yemen, both for our business and for the country.”

Our PSA for Block 51 (East Al-Hajr) in Yemen, which currently produces about 6,000 to 8,000 bbls/d net to Nexen (3,000 to 4,000 bbls/d after royalties), expires in 2023. We are currently evaluating alternatives with respect to Block 51 and future activities in the country.