Discussions Concerning the Pipeline from Block 9 to Block 18
Calvalley, a third party operator located on an adjacent block in Yemen (the "Third Party Operator"), and the Ministry of Oil and Minerals have recently commenced discussions to revise plans for a 245 kilometer 16 inch pipeline from Block 9 to a point within Block 18 for connection to an existing major export line from Block 18 to the Ras Issa terminal at the Red Sea.
It has been previously reported that Calvalley would be responsible for building and financing the entire pipeline and it was anticipated that other third parties along the pipeline right of way would connect to Calvalley's pipeline system.
Calvalley, the Third Party Operator and the Ministry of Oil and Minerals of the Republic of Yemen are now currently negotiating an arrangement whereby Calvalley will build and finance only 145 kilometers of pipeline from Block 9 to a point within a block operated by the Third Party Operator. In turn, the Third Party Operator will be responsible for financing the balance of the approximately 100 kilometers of pipeline required to connect to Block 18.
Calvalley, the Third Party Operator and the Ministry of Oil and Minerals are committed to continuing to coordinate their efforts for the construction of the proposed pipelines. The reduced distance in respect of Calvalley's portion of the pipeline will significantly reduce Calvalley's construction cost commitments.
Calvalley will continue to use best efforts in order to expedite the construction of the pipeline and is committed to working diligently with all parties toward the finalization of all issues relating to the project.
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