Nexen plans large Yemen program in 2005

Jan. 10, 2005
Nexen Inc., Calgary, plans to expand activity on Block 51 in Yemen as part of a company-wide $2.6 billion capital budget, up 27% from 2004 outlays.

Nexen Inc., Calgary, plans to expand activity on Block 51 in Yemen as part of a company-wide $2.6 billion capital budget, up 27% from 2004 outlays.

The budget for Block 51 is $200 million in 2005, up from $125 million in 2004.

Nexen said its progress on Block 51, where it has an 87.5% working interest, should allow overall Yemen volumes to continue unchanged in 2005 from 2004 despite a production decline on the adjacent Masila block.

The company said it expected to have produced 80% of Masila's expected ultimate reserves by the end of 2004. Nexen expects to recover more than $1 billion more before expiration of the primary term of its production sharing contract in 2011.

Nexen has the right to negotiate a 5-year extension. The company has already generated more than $1.5 billion net to its interest in Yemen.

The 2005 plan for Masila is to drill at least 20 wells to further develop existing fields and test deeper horizons where the company has had recent success.

"This results in approximately 74,000 to 84,000 b/d of oil production from Masila and generates approximately $300 million of free cash flow net to our interest," Nexen said. The company also expects drilling to increase after it updates field depletion plans.

Since starting Block 51's first oil production from Baishir al Khair-A field in mid-November, production grew to 5,000 b/d by mid-December and was to rise to 25,000 b/d late in the second quarter of 2005. Another 15 development wells are to be drilled in 2005 to maintain deliverability.

With BAK-B field starting up in late 2005, Block 51 production should remain at 25,000 b/d through 2007.

Exploration success could add to that volume. For instance, the BAK-I exploration well in northern Block 51 found oil shows and is to be production tested. Nexen spudded a fourth exploration well on the block and was to spud a fifth well by yearend 2004. It planned two more wildcats in 2005.

Nexen said most of the more than 100,000 b/d of Yemeni oil production as of late 2004 came from the Cretaceous Upper Qishn formation. It also produces oil from formations below the Upper Qishn including the Lower Qishn, Upper Saar, Saar, Madbi, Basal Sand, and basement.

Masila blend oil is sweet and averages 31º gravity at very low gas-oil ratios.