Nexen Keen to Work with Statoil Offshore Yemen

SANA'A Apr 23, 2007 (Dow Jones Newswires)

Canada's Nexen Inc. (NXY), the biggest oil producer in Yemen, is keen to work with Norway's Statoil ASA (STO) to bid for offshore blocks in Yemen's next round later this year, the company's president said Sunday.

Commenting on the news that Statoil was interested in entering Yemen, Alistair Mooney said Statoil had made contact with Nexen recently. "We could work with Statoil," Mooney told Dow Jones Newswires in an interview.

Yemen plans to launch its first offshore bid round in the second half of 2007, with 10 blocks up for grabs. Statoil has substantial offshore experience, which could complement Nexen's understanding of Yemen, having been in the country since 1986.

"We bring operating experience in Yemen," Mooney said. At one time producing 230,000 barrels of crude oil a day, Nexen's two blocks were down to around 135,000 barrels a day last year.

Nexen will drill some 30 wells this year to maintain production, spending $100 million in capital costs and $200 million in operating costs, although Mooney expects output to slip to around 130,000 barrels a day in 2007. It has one exploration block, Block 61, in which six to eight wells have been drilled. "Two or three have hints of things," Mooney said.

Yemen is trying to reverse the decline in oil output by increasing exploration. Oil production is at around 350,000 barrels a day, down from around 420,000 barrels last year.

Last week the Oil Ministry redistributed planning for oil and gas sites, carving some areas into smaller blocks to create 100 blocks in total.

"Eighty percent of Yemen has not been explored," Oil Minister Khaled Bahah said during an oil and gas roundtable in Yemen's capital Sunday.

"More blocks mean more opportunities for oil investment," Mooney said. Asked whether Yemen can meet its target of 500,000 barrels a day of oil production in the next five years, Mooney said: "It depends on the offshore."

Nexen's Yemen operations, in which it has invested $3.3 billion in total, used to represent 40% of the company's total oil activities. "But this will drop to 15% when our big projects - the 200,000 barrels a day Buzzard field in the U.K., and the first phase of the Long Lake oil sands project (producing 80,000 barrels a day) in Alberta - begin," Mooney said.

Security is an ongoing concern in Yemen. Last year Nexen's oil facilities were attacked by a suicide bomber. "They got further than (the attack on Saudi oil installation) Abqaiq, they actually got into the facility," Mooney said. Saudis say the Abqaiq attack was foiled before the bombers got past the second gate. "We have to take precautions- we've raised our standard procedures. We're still operating - we've never stopped oil production," he said.

Yemen LNG, the country's $3.7 million liquefied natural gas project, has 15 community liaison officers to negotiate with local tribal leaders to placate opposition to the project and avoid attacks on the site, Total SA's (TOT) Joel Fort, general manager of YLNG, told Dow Jones Newswires.

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

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