Kuwait Energy plans Yemen oil acquisition

19 November 2012

Privately owned Kuwaiti firm in discussions with the US’ Hunt Oil for Block 5 stake

Kuwait Energy Company (KEC) is in discussions with the US’ Hunt Oil to buy a major stake in its oil concession in Yemen, ahead of a planned flotation.

According to sources close to the Oil & Minerals Ministry, the company has set its sights on Yemen’s Block 5 oil concession, currently owned and operated by Hunt Oil, under a five-year production sharing agreement (PSA). The planned Yemen purchase could also come ahead of a possible listing on the London Stock Exchange (LSE) in 2013.

Hunt Oil is the operator of the block, which produces about 45,000 barrels a day (b/d) of oil, making it Yemen’s third-largest producing acreage. According to industry sources in Yemen, this means any deal for the block would be expensive for the Kuwaiti firm.

“Block 5 produces about 45,000 b/d, so Hunt would want too rich a price, which I don’t know if Kuwait Energy could afford,” says one industry source.

The purchase of the block could also be complicated by the ambitions of state-owned firms, such as Safer Exploration & Production Operations Company (Sepoc). There are three years left to run on the PSA, with no guarantee the contract will be renewed. Sepoc took over the expired 20-year PSA at Marib block 18 in 2005, previously held by Hunt Oil since the 1980s.

In November 2011, Yemen established a new state-run oil company, Masila Company for Petroleum Exploration & Production (PetroMasila) to replace Canada’s Nexen at Block 14 in the central Masila Basin as the firm’s PSA came to an end. The company had been seeking an extension.

Kuwait Energy already has stakes in seven exploration and production blocks across the country. It is the operator of four blocks - 15, 35, 49 and 74 - all of which are still in the exploration stage. Only Block 43, in which Kuwait Energy has a 28.33 per cent stake, has any production. The block is operated by Norway’s DNO International.

The company has previously stated that it aims to increase its overall production to 75,000 barrels of oil equivalent a day (boe/d) by the end of 2015, more than four times its current production. Reaching this goal will come through the acquisition of medium-sized mature producing fields.

“We are always in talks with various groups and on the lookout for good opportunities,” a company spokesman told MEED. “With that being said, we are not in a position to elaborate on such discussions.” The spokesman would not confirm whether Kuwait Energy is planning to float, but added it still plans to list on the LSE “as and when market conditions are favourable”.


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