Hunt in dispute over block 18

09 December 2005
Yemen Exploration & Production Company (YEPC), a US joint venture of Hunt Oiland ExxonMobil Corporation, has filed arbitration at the Paris-based International Chamber of Commerce against the government over the removal of YEPC as operator of block 18, located in the Marib basin.

'Since 15 November, 2005, the government of Yemen has taken numerous actions to prevent YEPC from exercising its duties as operator of block 18 in breach of various legally executed and binding agreements signed in 2004,' Hunt said in a statement. 'This is without precedent in Yemen. Furthermore, Yemen has attempted to replace YEPC in the Marib block with a government-owned company, Safer Exploration & Production Operations Company.'

Hunt said it had signed a five-year extension to its 20-year production sharing agreement (PSA) in January 2004, which was due to come into effect in mid-November. 'Since the signing of the extension in January 2004, YEPC has spent millions of additional dollars in Yemen at the request of the government,' it said.

A major question raised by the dispute is the impact on the rejuvenated Yemen LNG (YLNG)project. Hunt is an 18 per cent shareholder in the project company and the gas feedstock for the two planned liquefied natural gas (LNG) trains at Bel Haf will be sourced from block 18. 'We don't foresee it having any impact on the project,' says a spokesperson for France's Total, the main foreign shareholder in YLNG.

'What happened was that the government said that parliamentary approval was needed for the five-year extension of Hunt's concession and parliament rejected the proposal,' says another official involved in the project. 'But I don't see the LNG project being derailed. At worst, it might be delayed for a few months.'

Parliament had earlier objected to aspects of the YLNG scheme, accusing the government of pricing the LNG to the offtakers - Korea Gas Corporation (Kogas), Total and Belgium's Suez Energy Tractebel- too cheaply.

However, a final investment decision was taken by Total and the other shareholders in late August and the main engineering, procurement and construction (EPC) packages, covering the pipelines and liquefaction trains, have been awarded (MEED 30:9:05).

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