Nexen Inc., the producer of about 35,000 barrels of crude a day in Yemen, said its largest contract with the war-torn nation will expire Dec. 17 after negotiations failed on an extension.
A newly created Yemen national oil company will take over operation of the Masila field, which was expected to yield Nexen as much as 28,000 barrels a day this year, the Calgary-based company said in a statement today. Occidental Petroleum Corp., the former parent of Nexen, produces 11,000 barrels daily from the field, according to a Nov. 3 regulatory filing.
About one of every six barrels Nexen produced daily during the third quarter came from Yemen, the company said on Oct. 27. Nexen’s Yemen operations accounted for 18 percent of gross profit last year, according to data compiled by Bloomberg.
Yemeni President Ali Abdullah Saleh today signed an agreement to transfer power to a deputy and initiate elections, after a crackdown on protesters that left almost 900 people dead. Saleh is the fourth leader to succumb to unrest spreading through the Arab world after governments were toppled in Tunisia, Egypt and Libya.
Nexen is “evaluating alternatives” for its East Al-Hajr block in Yemen, which produces as much as 8,000 barrels a day net for the company and has a production-sharing agreement that expires in 2023, according to today’s statement.
Pierre Alvarez, a spokesman for Nexen, declined to say what options the company is weighing for the remaining block, which is near the Masila field and shares a processing facility with it.
Occidental’s production from Masila will account for less than 2 percent of the company’s sales in the fourth quarter, and the loss of the field was anticipated, Melissa Schoeb, a spokeswoman, said in an e-mail today.
Production at Masila peaked in 2003 at 225,000 barrels of oil a day, Nexen said in the statement. The lost revenue will be offset by new output from the Usan project off the coast of West Africa, Nexen said. Alvarez declined to say whether production from Usan would make up for Yemen losses.
Nexen rose 1.5 percent to C$15.53 at 4:23 p.m. in Toronto.