OMV Boosts Role in Middle East to Raise Output

DUBAI Mar 28, 2007 (Dow Jones Newswires)

OMV AG (OMV.VI), central Europe's biggest oil and gas company, will invest as much as $100 million in an oil field redevelopment in Tunisia in the next two years and boost production in Libya and Yemen as part of its strategy to expand operations in the Middle East and North Africa.

The Vienna, Austria-based oil and gas company, which was set up in 1956 and recorded a turnover of $19 billion last year, plans to raise global production by more than 50% to 500,000 barrels a day of oil equivalent by 2010. The wider Middle East will play a seminal role in meeting the target. "The Middle East is clearly one of our core regions," member of the OMV executive board and head of exploration and production, Helmut Langanger, told Dow Jones Newswires in an interview in Vienna.

Libya, where OMV has carried out exploration activities since 1985, already represents the second most important international revenue source after Romania and the importance of other countries in the region is rising, Langanger said.

OMV's overall daily production in the Middle East and North Africa region now stands at about 55,000 barrels of oil equivalent, or close to 20% of its total production.

International oil companies such as OMV are keen to raise their game in the Middle East, which holds almost two thirds of the world's oil and gas reserves.

However, restricted access to resources in major oil producing countries such as Saudi Arabia and Kuwait has left oil firms seeking to book new reserves battling it out in countries such as Libya, one of the few places in the region that invites foreign participation.

For OMV, the North African state, that holds the continent's largest proven oil reserves at 39.1 billion barrels, "absolutely is a main focal point. It is one of the countries where we have most involvement in," Langanger said.

OMV's net oil production in Libya now stands at about 32,000 barrels a day, he said, a level that is expected to rise steadily in coming years.

In 2007, OMV will drill 13 exploration wells in Libya, which means that more than one fifth of all wells planned by OMV this year will be located in the Mediterranean country, the oil executive added.

In addition, the company will target future gas concession rounds in Libya, the next of which is expected to take place by year-end, Langanger said.

"We are also a gas player, so this is very interesting for us," he said.

One of OMV's largest investments this and next year will take place in Ashtart, one of the main oil producing fields in neighboring Tunisia, that first came on stream in 1976.

OMV plans to spend about $100 million on the comprehensive revamp of the offshore field, which it owns since the acquisition of oil assets from Germany's Preussag in 2003, Langanger said.

"We proposed to the government to redevelop the field using new technologies to extract further reserves and they accepted. We are now starting with the redevelopment," Langanger said.

The plan is for OMV and its 50:50 joint venture partner ETAP, the Tunisian state oil company, to produce an additional 30 million barrels of oil from Ashtart between 2008 and 2020, he added.

OMV is also talking to ETAP about recent gas and condensate finds in the Jenein Sud field in the Ghadames basin following the completion of two exploration wells, Langanger said.

The talks revolve around possible ways of commercializing the finds, which are located remotely in the country's south, he added.

"The resources are there. The question is what we can do with it," Langanger said, without providing a timeframe for possible development plans.

A schedule already exists for OMV's block S2 in Yemen, another asset acquired from Preussag. OMV operates and holds a 44% stake in the acreage, which is estimated to hold oil reserves of at least 50 million barrels.

"In December, we started production at S2. We plan to produce 5000 barrels a day in 2008 and 14000 barrels by 2010," Langanger said.

OMV also has high hopes for nearby block 2, awarded last year and still under exploration, he said.

In Egypt, OMV is preparing to launch a seismic survey covering block 11, located offshore in the Mediterranean, in the second half of the year, Langanger said.

The block, awarded last November, represents OMV's first involvement in Egypt and is set to be a launch pad for greater involvement in the country's oil and gas sector, he said.

This year, OMV will also decide on how to proceed with the Mehr block located in southwest Iran, Langanger said, adding that data from a second completed well at the offshore field was under evaluation.

"This year we will know whether we will develop it," he said about OMV's only operation in the country.

A decision on whether to bid in Iran's latest oil and gas exploration round, for which bids are due on June 10, has not been made but the areas on offer are being looked at, Langanger said.

Since the introduction of flights between Vienna and Irbil in Iraq's Kurdish region by Austrian Airlines AG (AUA.VI) in December, OMV executives have also held preliminary talks with local officials about possible oil and gas exploration in this relatively safe part of the country, Langanger said.

"We were in Irbil as part of an Austrian business delegation and talked to people in the oil ministry. We are sounding out, not negotiating. One has to see how relations between the Kurdish and the central government develop."

Copyright (c) 2007 Dow Jones & Company, Inc.


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