Petsec buys 100pc of block in war zone Yemen
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Petsec Energy has finalised its war zone purchase, taking full ownership of an onshore exploration permit in the heart of Yemen.
Investors initially sent Petsec’s (ASX:PSA) shares up 5 per cent, but this fell back at lunchtime as the stock fell 1 per cent to 9.9c.
The oil business has bought the Yemen subsidiary of Oil Search (ASX:OSH), which had the last 40 per cent state in the Al Barqa (Block 7) exploration licence in Yemen that Petsec doesn’t own.
After buying the other 60 per cent of the licence from KUFPEC, AWE Limited, and Mitsui E&P Middle East B.V. over the last two years, Petsec now owns the whole licence and inherited the operatorship of the block through Oil Search.
Head of investor relations Manny Anton told Stockhead the Oil Search part of the deal began in 2015 but had been held up by difficulties gaining government approvals.
Block 7 is an onshore exploration permit covering an area of 5,000 square kilometres about 340 kilometres east of the capital Sana’a.
Sana’a is currently occupied by rebel Al Houthis.
Petsec also owns the Damis (Block S-1) Production Licence for the An Nagyah Oilfield, which was producing oil at 12,000 barrels of oil per day (bopd) until it was shut-in at the end of February 2014.
The two blocks together contain six oil and 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.
Chairman Terry Fern said they met with Yemen officials at the government’s base in Riyadh, Saudi Arabia, and hopes its support will help them to reopen the An Nagyah Oilfield.
The oilfield closed in 2014 as the previous operator declared force majeure due to the war and the inability to ship oil from the Ras Isa port because of a Yemen and Saudi embargo on the ports.
Mr Anton says 85 per cent of Yemen is now back in government hands, including the areas they want to work in, and government oil production has started in the east of the country and being exported via the Ash Shihr terminal.
However, fighting continues in the west — the area where they want to pipe and export their oil.
Petsec intends to use the Marib pipeline to deliver oil to the Ras Isa island terminal sited in the west, on the Red Sea, if Yemen government forces can clear rebels from the area.
Mr Anton says they are either hoping for a peace agreement so they can use the pipeline, or they will look at trucking oil from An Nagyah to southern or eastern ports.
To do this, they need permission from the government to truck oil. But they are still waiting for this after 12 months of negotiations.
Mr Anton believes they can get the oilfield into production and exporting within five months of receiving that permission.