Austrian firm boosts Yemen oil production

20 November 2018
OMV became the first international oil company to restart crude oil production in Yemen in April

Austria’s OMV has lifted crude oil production to 17,000 barrels a day (b/d) from its block in Yemen’s Shabwa province, the Yemeni government-run Saba agency reported, quoting Minister of Oil Aws al-Oud.

OMV became the first international oil company to restart crude oil production in Yemen in April, and has already increased output to around 2,000 b/d from the Habban field in Shabwa's Block S-2, sources close to production said.

Production from the Habban field in Shabwa was restarted in April after being shutdown for more than three years due to the war between Yemen's Houthi militants and the Saudi-led coalition, which imposed a blockade of Yemeni ports preventing exports, shutting in production.

The Vienna-based company had been aiming to raise production to 10,000 b/d to 12,000 b/d by the end of the year, but has already exceeded the target. OMV did not respond to a request confirmation of its output figures or its longer-term ambitions for Yemen.

Block S-2 had been producing at about 23,000 b/d before OMV declared force majeure in April 2015, with the onset of the Yemen war. OMV is the operator of the block with a 44 per cent stake, along with China's state-owned Sinopec which holds 37.5 per cent. The remainder is held by Yemen's state oil companies.

Crude from the block is exported through a 200-kilometre pipeline from Shabwa to Bir Ali on the Gulf of Aden coast, to be loaded on ships. So far, OMV has made two shipments of around 500,000 barrels each from the Bir Ali terminal.

Yemen’s total oil production is still around 50,000 b/d to 60,000 b/d, according to Yemeni sources, around a third of its output before the war. Most of the production comes from blocks in the Shabwa, Marib and Masila provinces. The most important export terminal is Al-Shihr where crude is loaded from the Masila basin. This comes mostly from PetroMasila, and Safer Oil Company, two state-owned companies.

Crude from the central Marib province, previously Yemen's most productive acreage, has been shut-in, with the conflict in a stalemate. The Houthis maintain control of the northwestern border region, as well as key oil infrastructure such as the route for the Marib-Ras Isa crude oil export pipeline, and the Red Sea oil terminals at Ras Isa and Hodeidah port.

The provinces are hundreds of kilometres east of the fighting, which is focused in the northwest of the country along the border with Saudi Arabia, the Houthi-controlled capital Sanaa and Hodeidah. Yemeni President Abdu Rabu Mansour Hadi has repeatedly called for the oil ministry to boost oil and gas operations to bolster the government’s revenues.

So far, little has been implemented. The Yemen LNG (liquefied natural gas) consortium, led by French oil major Total, has yet to restart operations producing liquefied natural gas (LNG) from its plant at Balhaf on the Indian Ocean.

The 6.7 million tonnes a year (t/y) LNG plant is fed by gas from Block-18 in the central Marib province, but LNG shipments from Balhaf were halted in 2015. Yemen observers said there is no real obstacle to restart, though the consortium may face difficulties with financing and insurance.

Restarting export shipments would be a major coup, providing a much needed injection of cash. The government has struggled to pay public sector employees and the Yemeni rial has lost two-thirds of its value against the US dollar since the war broke out. Oil export revenues are currently paid into an account in Saudi Arabia, and used largely to cover debt obligations and government expenses abroad, the Yemen observer said.

Another company waiting for the internationally-recognised Yemeni government to greenlight production, is Australia’s Petsec Energy, which operates the 10,000 b/d An-Nagyah oil field. Petsec has been waiting since early 2017 for the necessary government approvals to restart.

It plans to truck 10,000 b/d of crude from the field around 70km to a loading facility, where it will be mixed with OMV’s output and pumped to the Bir Ali terminal for export, Petsec chairman Terry Fern said in a presentation in Sydney earlier in November.

This has been preferred to the previous option of trucking the barrels over over 600km to a pipeline hub at Block 14, and then pumped to the Ash Shihr for export. The oil ministry has given support “in principal” for the trucking plan, but Petsec will have to wait a little longer before it can start production again.

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