Middle East North Africa (“MENA”)
Historically the strategic and geographical focus has been predominately exploration in Louisiana, USA. This focus had shifted in 2014 to include oil reserve acquisition in the MENA region. In Yemen, the Company holds two leases. One with undeveloped oil resources, and substantial exploration potential, and the second a production licence over five sizeable oil and gas discoveries, one of which is developed (An Nagyah) and was in production until late in February 2014. The Company will actively continue to identify and acquire additional developed and undeveloped reserves within the MENA region.
Block 7, Al Barqa Permit, Republic of Yemen
Operator: Oil Search (ROY) Limited
Working Interest: 35%; Participating Interest: 29.75%
Block 7 is an onshore exploration permit covering an area of 5,000 square kilometres (1,235,527 acres) located approximately 340 kilometres East of Sana’a, 80 kilometres North East of the Company’s Damis (Block S-1) licence, and 14 kilometres West of OMV’s Habban Oilfield. The block contains the Al Meashar oil discovery as well as an inventory of eight potential prospect/lead targets ranging in size from 2 to 900 MMbbl oil gross, defined by 2D and 3D seismic surveys.
The Al Meashar Oilfield (target resource of 11 MMbbl to 50 MMbbl) contains two suspended discovery wells which in 2010-11, delivered flow rates ranging from 200 to 1,000 bopd in short-term testing of the wells. The oil exists in the same reservoirs and has a similar quality of oil to that of the Habban Oilfield.
Petsec currently holds a government approved non-operating 35% working interest (29.75% participating interest) in the Block 7 Joint Venture and expects to acquire from Oil Search Limited (ASX: OSH) its 40% working interest (34% participating interest) in Block 7 and operatorship.
The Company also has an agreement with KUFPEC to acquire their 25% working interest in Block 7. The KUFPEC and Oil Search transactions brings the Company’s potential interest in the block to 100% pending customary approvals from the Government.
Damis Block S-1, Republic of Yemen
Operator: Yemen (Block S-1), Inc.
Working Interest: 100%; Participating Interest: 82.5%
The Company acquired a 100% working interest (82.5% participating interest) in the block in early 2016.
Damis (Block S-1) of 1,152 square kilometres (284,665 acres) is located approximately 80 kilometres to the Southwest of Block 7 and holds five sizeable oil and gas discoveries – the developed and productive (until suspended in 2014), An Nagyah Oilfield, and a further four undeveloped oil and gas fields – Osaylan, An Naeem, Wadi Bayhan, and Harmel.
The four undeveloped fields hold substantial oil and gas resources in excess of 34 million barrels of oil and 550 Bcf of gas representing substantial potential future growth of reserves and production for the Company
The An Nagyah Oilfield audited reserves are assessed to be 12.8 MMbbl (2P) gross of which the financial net to Petsec Energy is 5.6 MMbbl of oil, having an NPV10 value of US$155 million as of 1 January 2016. This estimate is based on producing no more than the proposed initial restart production rate of 5,000 bopd for trucking purposes, over the remaining period of the production licence. The block contains significant existing infrastructure, including the An Nagyah Oilfield facilities, which have the capacity to handle production of 20,000 bopd, and are connected by an 80,000 bopd pipeline to the Marib Hub and into the Marib pipeline of 350,000 bopd capacity to the 3.5 MMbbl oil storage terminal on the island of Ras Isa on the Red Sea coast near the port of Hodeida.
The An Nagyah Oilfield which had initial reserves of 50 MMbbl of recoverable oil, commenced production in 2005, produced at rates exceeding 12,000 bopd and produced approximately 25 MMbbl until it was shut-in at the end of February 2014 following a declaration of Force Majeure. The field was producing at a restricted rate of over 5,600 bopd at the time of shut-in. The previous operator declared Force Majeure due to the political situation in Yemen and the resulting inability to ship oil from the export pipeline terminus at Ras Isa because of the Yemen Government/Saudi Coalition embargo on crude oil liftings.
The An Nagyah production facility has been well maintained during the shut-in period and remains in good condition. The facilities are connected to the Marib Pipeline which delivers crude oil to the Ras Isa island terminal which is near the Red Sea port of Hodeida. The crude oil export terminal at Ras Isa has been closed since March 2015 due to the Hadi Government Coalition embargo on oil shipments because the rebels control the nearby port of Hodeida. Yemen Government forces are currently moving on Hodeida to clear the rebels and restore oil lifting from Ras Isa.
The Company in response to a request made by the Hadi Government in late 2016, to truck Marib crude to government owned facilities in the Masila Basin which can pipe crude to the South to the Ash Shihr terminal near Mukalla on the Arabian Coast, has been pursuing an alternative transport option to the Marib Pipeline, which would allow An Nagyah oil production to be trucked 530 kilometres East to the Masila Basin Pipeline Hub. The Company is planning to commence production at 5,000 bopd and within 12 months increase production to 10,000 bopd, from currently suspended wells.
As part of the trucking strategy the Company contracted with leading U.S. engineering firm S&S Technical Inc. to manufacture of a 5,000 bopd oil tanker loading equipment to be installed at the An Nagyah CPF. The manufacture and assembly testing of the equipment was completed in the second quarter 2017.The truck loading equipment is disassembled and packed for shipping. Timing of shipment is predicated on receipt of the Hadi Government approvals to truck to the Yemen Government owned Masila Basin facilities.
The restart of oil production from An Nagyah and transport of crude oil by way of truck to the Masila Basin oil loading facilities or other export terminals, including the Aden Refinery, remains subject to the receipt of Hadi Government approvals to use those government facilities.