26 September 2017

25% stake of Yemen oil block sold for $90 million to Indonesia’s Medco Energi by RIL


Yemen oil block sold for $90

News Insights

As per the reports given by economic times, RIL had signed agreement for two blocks of production sharing agreement in Yemen in November 2007. The agreement was signed by Yemen’s Deputy Oil Minister and RIL representative Atul Chandra. In 2001, RIL was present in Yemen and was allocated block number 9, where substantial reserves of hydrocarbon had been established. RIL and Hood Energy holds 25 per cent stake each in this block and Calvalley Petroleum Inc, with 50 per cent, is a partner in this joint venture.

As per the latest information from economic times, the Reliance Industries have sold their oil block of 25% stake in Yemen to Indonesia’s company named Medco Energi for $90 million in August 2012. The Dubai-based subsidiary of RIL i.e. Reliance Exploration & Production DMCC  has signed the completion documents for divestment of its 25 per cent working interest in the Yemen’s Block-9 to Medco Yemen Malik Ltd, a wholly-owned subsidiary of PT Medco Energi Internasional Tbk of Indonesia .

As per the reports, the sale agreement between RIL with Medco would be effective from January 1. Since the agreement is for 25 per cent interest, Medco would effectively have a 21.25 per cent participating interest in the block. This is because, under a regulation in Yemen, the contractor of a production-sharing agreement has to hold a working interest for the country, which is represented by the Yemen Oil and Gas Company, which will hold a 15 per cent stake. Accordingly, the operator Calvalley Petroleum would have 42.5 per cent interest and Hood Oil 21.25 per cent stake.

According to the reports, RIL would have got another USD 5 million if the block produces 10,000 barrels of oil per day, but currently it is producing oil between 6,000 bpd and 6,500 bpd.

The construction contract between RIL and Yemeni government was signed for a period of 20 years over the block in 2005 which the joint venture can apply to have extended for a further five years after 2025.

In July, RIL sold its 80 per cent interest in Rovi and Sarta onland blocks in northern Iraq to US oil behemoth Chevron Corp for a reported USD 200 million.

RIL now is left with a portfolio of 10 overseas oil and gas assets including two each in Peru, Yemen, Oman and Colombia and one each in East Timor and Australia, after the exit from Kurdistan and Yemen.

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