Canadian Nexen Starts the Partial Handover of Masial Block 14 to Yemen Government

National Yemen

Nexen terminal

National Yemen

The Supreme Economic Council approved the establishment of a local company named Masila Company for Petroleum Exploration and Production (PetroMasila) this past Saturday. This move effectively pushes Canadian Nexen Petroleum out of its role in Masila block 14 after many years of work in the area.

Canadian Nexen Petroleum Yemen now must begin the initial procedures toward the complete hand over of the block to the Yemeni government. The Board of Directors and chief executives of Canadian Nexen were lobbying to extend the contact with the Yemeni government for the past five years, but the ongoing unrest and political uprising in the country jeopardized their efforts.

Canadian Nexen is the second international operator to hand over its activities following Hunt Oil Company, which was also replaced by a local operator named Safer Exploration and Production Operations Company.

Dr. Ali M. Mujawa, Prime Minister and Chairperson of the Supreme Economic Council ordered to refer the company’s establishment decision draft to the Cabinet for further discussion and to finalize the legal procedures for the transfer.

Under the decision, PetroMasila will take over the duties and responsibilities in Maisila Block 14 when the agreement between the company and the government of Yemen expires on December 17th 2011.

The government of Yemen is applying article 7 of the decision draft which stresses that PetroMasila will run and operate Block 14 according to the international standards among global petroleum industry operations. As a result, PetroMasila will acquire all the rights and privileges of Canadian Nexen, the former operator, and well as all other duties and obligations.

The article also stipulates that the PetroMasila Company must conduct further exploration and development operations by itself or via contracting with local and foreign specialists.

While the negotiations between Canadian Nexen and the Ministry of Oil and Minerals were long, they ended amicably. The result was much different than the negations between the Ministry of Oil and Minerals and Hunt Oil Company, which the negotiations degenerated into a situation with Hunt Oil Company challenging the termination procedures of Block 18 and the treatment of its company staff in an international court.

Canadian Nexen Petroleum Yemen was the first to conduct a successful Masila exploratory well and was drilled in Sunah during 1990. Canadian Nexen quickly followed this with additional discoveries following in Heijah and Camaal. Initial production began in July 1993. Masila crude oil averages 32° API at very low gas-oil ratios. Most of the oil is produced from the Upper Qishn formation, but oil is also produce from deeper formations, including the Lower Qishn, Upper Saar, Saar, Madbi, Basal Sand and Basement formations. Production is collected at our Central Processing Facility (CPF), where water is separated for reinjection and oil is pumped to the Ash Shihr export terminal on the Indian Ocean and shipped to customers, primarily in Asia.

Nexen produced from two blocks in Yemen, Masila (Block 14) and East Al Hajr (Block 51), and exports almost all of it to Asia from the Ash Shahir terminal on the southern coast of the country.

Block 14 had the country’s largest proven oil reserves at the end of 2010 according to data from Yemen’s Petroleum Exploration and Production Authority (PEPA).

Canadian Nexen opened its first office in Yemen in 1987. Throughout its work in Yemen, the company has maintained the highest standards of integrity, responsibility, and professionalism in its activities in Yemen and around the world. This code of conduct means enforcing strict measures governing health, safety, and environmental protection, human resource development and Yemenization, transparency and accountability in business, and good stewardship of Yemen’s resources. As a responsible corporate citizen, Canadian Nexen considers Yemen’s overall economic development a high priority and participates in this process in a number of ways. The Community Affairs Program subsidizes local community projects, the Individual Development Program trains the Yemeni workforce, and the Yemen Scholarship Program provides funding for deserving local students to pursue bachelor’s degrees in Canada.

Even though the company will no longer work in Block 14. The company still has the opportunity to continue its operations in Block 51 in east Al-Hajr.

The East Al-Hajr block was declared commercial   in December of 2003. The initial development plan for the Bashir Al Khair field included a standalone processing facility, a gathering system, a water distribution system, custody transfer metering, and a 16-inch oil pipeline.

Production at the BAK fields began on November 9, 2004, six weeks ahead of schedule and less than 11 months after the declaration of commerciality, which represents an outstanding achievement for the project and the people of Yemen.