Jan. 2001 Vol. 222 No. 1  International

Kurt S. Abraham,  Managing/International Editor

Yemeni officials believe oil discovery is significant

Yet another oil find has been struck in Block 53 of eastern Yemen, prompting optimistic declarations from the Ministry of Oil and Mineral Resources in Sana’a. The latest well drilled on this tract operated by Britain’s Dove Energy, Shariof 2, tested 16,150 bopd early last month. It follows the initial discovery, Shariof 1, which was drilled last summer and flowed about 5,000 bopd.

Estimated reserve figures for these two wells in Hadhramaut province (see map) are slated to be released by the ministry sometime during the first quarter of this year. Nevertheless, Oil and Mineral Resources Minister Mohammad al-Khadem al Wajih described the finds as "promising." Initial reports from the Shariof 1 well had shown an oil layer 35 ft thick. It was drilled by a rig belonging to China’s Sinopec.

Last July, Wajih had projected that high crude prices would push Yemen’s oil revenues for 2000 to $1.4 billion, a 40% increase over 1999’s level. Last month, Deputy Minister of Finance for Budget Affairs Faud al-Kumaim said he expected Yemen’s oil and mineral resource revenues to grow to YR 329 billion ($1.996 billion). As of late 2000, Yemen’s oil production was running at about 480,000 bpd.

Latest Yemeni oil discoveries lie within the remote eastern province of Hadhramaut.

Norway will sell interests directly. Rather than call an open auction to sell State Direct Financial Interests (SDFI), Oil Minister Olav Akselsen said the government would negotiate directly with a select group of oil and gas companies, both foreign and domestic. The SDFI assets constitute the government’s stakes in 150 Norwegian offshore licenses that are thought to hold 40% of the nation’s petroleum resources.

In public remarks, Akselsen said, "No one will ‘get’ anything; all must pay market value." The ministry is likely to approach operators that it believes have the best chance to grow the value of these SDFI assets. Such firms would be operators that already have large holdings in certain fields, whereby they can increase the fields’ efficiencies through enlarged holdings. This would help the state realize its goal of increased petroleum revenues. As this issue went to press, the government was due to release a "white paper" that would detail the amount of SDFI assets up for sale.

Viet Nam’s gas deal set back by sudden death. In one of the stranger twists of fate, a major natural gas development project offshore Viet Nam was delayed last month by the death of a key negotiator. A $1.5-billion contract for the Nam Con Son gas development had been set for signing on Dec. 6, 2000, between state oil company Petrovietnam and a consortium comprising BP, Statoil and India’s Oil and Natural Gas Corp. The project will develop Lan Tay and Lan Do gas fields in offshore Block 6-1, 400 km (250 mi) southwest of Vung Tau, and build a 399-km (248-mi) pipeline.

However, Viet Nam’s chief negotiator, Nguyen Trong Hanh, 49, suddenly died, forcing the deal’s closure to be postponed. Nguyen, a director of Petrovietnam, had been an early proponent of the Nam Con Son project, and he was the driving force that kept it going through numerous negotiations. Despite Nguyen’s death, the Ministry of Planning and Investment said the deal would be signed later last month, before year’s end.

Papua New Guinea seeks to sweeten the pot. The government of Prime Minister Mekere Morauta is taking steps to attract fresh investment in Papua New Guinea (PNG) from petroleum and mining companies that may have been scared away by high taxes, and political and social turmoil. At a conference in Sydney, Australia, to promote his country to international investors, Morauta said that petroleum and mining production account for 17% of PNG’s revenues, 75% of exports and 29% of the national economy.

Although the government is leaving royalties unchanged, it is reducing other taxes, particularly a tax on projects that achieve high rates of return. Deductions for exploration and development costs also will be increased. In addition, officials guarantee that the government’s take will remain unchanged for 10 years following the start of any oil or mining development project, and for 20 years after any gas project begins.

"Having resources is not sufficient," Morauta told the crowd. "Competition is what is required. My government wants mining and petroleum companies to invest. The size of the investment and the boost to national development are vital." The prime minister lamented that PNG was once a "must-be-there" country for explorers. "Alas, in recent years, all that has changed. Very few (companies) see PNG as a priority for investment. In large measure, this is our own fault."

Indeed, governmental mismanagement of resources, as well as the economy as a whole in recent years, has caused the country’s credit rating to plummet. In turn, banks have been unwilling to finance new developments. PNG officials also made the mistake of raising extra revenue from resources at the very time that other countries were making their investment climates more attractive.

Within the oil sector, production rates have dropped sharply at fields that began going onstream eight years ago, and not enough new exploration has taken place. Thus, immediate hopes for greater oil and gas revenue rest on a proposed $3.5-billion project, to build a pipeline that will carry natural gas to Australia.