Roger Vielvoye
International Editor
Two types of action mark oil industry activity at opposite ends of the Arabian Peninsula.
In Kuwait, the astounding achievements of firefighting teams have captured world headlines.
Some 1,200 miles to the south, Yemen is establishing itself as a center for exploration and production.
THE KUWAITI FIRES
Firefighters extinguished the last burning well in Kuwait on Nov. 6, less than 7 months after the massive well control program began.
Most observers had believed the effort would require years to complete.
But there was no precedent on which to base forecasts. When occupying Iraqi troops retreated in February, they left 749 wells burning out of control in Kuwait and a massive oil spill in the Persian Gulf.
It was by far the largest act of environmental sabotage in history. And it required an historic repair effort (see photos). Bechtel Inc., the restoration manager, said 9,000 workers from 37 countries took part.
The endeavor captured international attention not just because of the devastation, spill, and immense clouds of smoke that spread throughout the Persian Gulf region; the speed at which Kuwait restores crude oil production and exports will affect an oil market now functioning near capacity.
At the beginning of last month, Kuwaiti production had reached 290,000 b/d and was expected to rise to as much as 500,000 b/d by yearend and 800,000 b/d by next June.
One of Kuwait's three refineries outside the Neutral Zone last month was processing 170,000 b/d of crude. An unspecified number of wells remained out of control in the Neutral Zone.
ACTION IN YEMEN
While firefighters were accomplishing what many considered to be the impossible to revive a traditional oil production leader, oil companies were scaling up output in a comparatively new Middle Eastern producer.
Opening of a second crude oil pipeline from the remote interior of Yemen to the Gulf of Aden coast boosted production to 230,000 b/d--about 200,000 b/d from the Marib al-Jawf concession in northern Yemen and 30,000 b/d through the new pipeline from fields developed by Soviet contractors in southern Yemen.
Output might rise further now that the Soviets have been displaced as contractors of the potentially rich Shabwa oil fields. They were replaced with an Arab group that plans to bring in an experienced foreign partner to reevaluate the disappointing development project in this area.
Shabwa is in former South Yemen, which united with North Yemen in 1990. In addition to its rapidly growing role in the oil market, the new country has the potential to become a significant gas player. Unofficial estimates put reserves in the Marib al-Jawf area at as much as 15 tcf.
Interest in Yemeni exploration has been heightened by three discoveries by Canadian Occidental Petroleum Ltd. in partnership with Pecten Yemen and the Lebanese company Consolidated Contractors International Co. (CCIC) on the Masilah-Barriyah concession in the eastern part of Yemen.
The group has five rigs and two seismic crews operating a major exploration and appraisal program on what industry sources say are substantial reserves.
Yemeni President Ali Abdallah al-Sahil recently estimated reserves of the Masilah-Barriyah at more than 490.7 million bbl. But CanOxy said it did not have sufficient data to confirm this figure using engineering standards accepted by the petroleum industry.
Foreign company interest in exploration has encouraged the Yemeni government to seek demarcation of its borders with Saudi Arabia and Oman. Only a section in the northwestern part of the country is fixed by international treaty, and there is no official demarcation through the southern part of the Empty Quarter.
SHABWA DECISION
The long awaited government decision on a replacement for the Soviets on Shabwa Block 4 surprised nearly everyone.
The group selected to operate the block is Nimir Holding Co., registered in Bermuda and owned by Arab interests, mainly expatriate Yemenis and Saudis with Yemeni family connections.
The acreage had attracted considerable attention from most companies operating in Yemen and a number of other international groups anxious to break into the area. Nimir received three other blocks east of Shabwa.
The company has no operating experience. An ARCO unit, ARCO Shabwa Inc., has signed an agreement with Nimir to complete Block 4 exploration and development. The agreement is subject Yemeni government approval.
The Soviet contractor Technoexport and Tyumen Pipeline Construction Association have developed Iyad East and West and Amal oil fields and built a 130 mile, 20 in. pipeline to the Gulf of Aden coast at Bir Ali, site of a new storage and export facility.
The system has a capacity of 135,000 b/d. First estimates from the former South Yemeni government and its Soviet contractors suggested that output would be about 120,000 b/d. However, the Soviets have never been able to boost output from the facilities to anywhere near this level.
The pipeline and export facilities were opened earlier this year. According to sources in Yemen, output has never risen above 30,000 b/d. The 41-43 gravity oil has sulfur content of 0.6-0.8%.
Before the opening of the pipeline, terminal, and offshore single buoy mooring, Technoexport had been trucking as much as 10,000 b/d of crude from Shabwa to the Aden refinery.
SOVIET BACKGROUND
Technoexport found the first commercial oil in the Shabwa area under a contract with the old South Yemen government in 1986 and 1987.
The Marxist South Yemen government first brought Soviet contractors to the Shabwa and Hadhramout area in 1976 to carry out basic exploration. Six years later the Soviets signed a new agreement limiting their efforts to Shabwa.
Technoexport's first discoveries were Iyad East and Iyad West fields.
Relations between the contractors and their hosts were never smooth. The South Yemen government continually pushed for results that the Soviets could not deliver.
Lack of confidence in the Soviets turned into action in 1987, when a large portion of East Shabwa was removed from the contract area and awarded to exploration groups headed by Total-Cie. Francaise des Petroles in partnership with Unocal Corp. and Kuwait Foreign Petroleum Exploration Co. (Kufpec).
South Yemen took new measures to reduce Technoexport's activities at the beginning of last year, when the remaining Shabwa area was divided into nine blocks.
Technoexport remained contractor on Block 4, where development work was in progress and was offered Blocks S-1 and S-2 on a production sharing basis. The other blocks were offered to foreign groups.
Technoexport eventually rejected the production sharing terms and remained only in Block 4 as a contractor. Unification of North and South Yemen brought new pressure on Technoexport to improve its performance as the development project dropped behind schedule.
The Yemeni oil ministry was particularly unhappy with Technoexport's work on reservoir management and decided to transfer control of the project to another company. Technoexport retains the right to a 25% stake in any new joint venture between Nimir and an international company.
Industry sources doubt that the Soviets will have the financial resources to participate.
THE NEW TERMS
Under terms of the deal covering Block 4, Nimir will pay $500 million for 69 wells drilled so far, field gathering and processing facilities, and the pipeline, terminal, and SBM.
As well as production rights, it will receive full technical data from the Soviets on the entire area. However, it is thought Nimir will run its own technical study of the three producing fields and other prospects in the area.
The Soviets are thought to have found 3-4 billion bbl of oil in place. No official figure has been given for the recovery factor from the fields.
The former Technoexport fields are in the same basin as the productive Marib al-Jawf concession operated by Yemen Exploration & Production Co. (YEPC), a joint venture of Yemen Hunt Oil Co., Exxon Corp., and the South Korean company Yukong.
Reserves of the area are variously estimated at 500 million-1 billion bbl. Eight oil fields have been put on stream, but production has fallen from its peak of about 210,000 b/d.
YEPC is attempting to halt the decline, centered on Alif field. Start-up of expanded gas processing facilities in Asad al-Kamil field should allow liquids production to rise from 30,000 b/d to 45,000 b/d.
Large quantities of gas have been found on the concession. Three fields declared commercial this year raised proved gas reserves from 8.66 tcf to 13-15 tcf.
YEPC said the three new fields, al-Saidah, al-Raja, and Dostour al-Wihdah have estimated reserves of 4.5-6 tcf.
Initial test production from the new fields will start next year at no more than 40 MMcfd. A 400 MMcfd gas processing unit is being built in Asad a]-Kamil field. It will allow full gas production from the new fields to begin in 1994.
GAS SCHEME NEEDED
The new gas production facilities have accentuated the need for a gas disposal system to handle output from the area. Associated gas is being reinjected at a rate of 650 MMcfd. Gas liquids are sold locally on a limited scale, but there is still no outlet for the methane.
Studies have suggested using the gas for power generation, fertilizer production, methanol, and even as the basis for an LNG export scheme. The government has asked Hunt and Exxon for new plans for gas utilization based on upgraded reserve estimates.
Latest reserves estimates make no provision for gas that may be found in promising Block 5, which covers the former disputed zone between North and South Yemen. The three new gas fields are in the northeastern part of the YEPC acreage close to the border with Block 5.
The 2,180 sq km Block 5 concession has been awarded to a consortium operated by Total in partnership with Hunt-Exxon, Kufpec, and two Soviet concerns, Machinoexport and Zarughgeologia.
The joint company, Yemen Co. for Investment in Oil & Mineral Resources (Yciomr), is committed to spend $27 million on 1,400 line km of seismic survey and seven wells. Drilling is under way.
The Soviet association with the company has not been steady. The western partners initially rejected a request from the two companies to meet cash calls with Soviet-made equipment. There is now confusion over the ultimate ownership of the two companies in the Soviet Union, which may force them to withdraw if cash cannot be found to meet commitments.
ACREAGE ALLOCATED
Yemen is attracting explorationists from all over the world. All the acreage around Shabwa Block 4 has been allocated, and a major exploration effort is expected over the next few years as companies meet license commitments.
Groups led by Sun Oil Co., Crescent Petroleum, Chevron Corp., Strake Trading, BP Exploration, Showa Shell, and CanOxy have acquired the remaining former Soviet contract areas.
However, CanOxy's finds in Masilah-Barriyah Block 14 have temporarily diverted attention away from the Shabwa area.
Although the Canadian-based company could not confirm the Yemeni president's estimates of reserves, the government statement captured the attention of other exploration groups.
So far the company has found oil in three formations with the Heijah-1, Sunah-1, and Caamal wells.
According to the government, CanOxy has started outline planning of a commercial development of the structures. A major part of any investment will be required for a 90-100 mile pipeline to an export terminal on the Gulf of Aden near al-Shihr, east of Mukalla.
The two blocks north of the CanOxy discoveries were allocated this fall. British independent Clyde Petroleum acquired the 7,300 sq km tract immediately north, and a partnership of Lasmo plc and the Australian company Coplex was awarded a 6,300 sq km permit nearby.
Copyright 1991 Oil & Gas Journal. All Rights Reserved.
