Nexen still sees opportunities in Yemen: CEO

Canada's Nexen remains hopeful of future opportunities in Yemen, despite the cash-strapped Yemeni government's refusal to renew its operating licence.

"The country still offers good opportunities," Chief Executive Marvin Romanow told Reuters in an interview on the sidelines of World Petroleum Congress in Doha. "We will have to be patient as the government goes through its transition."

Political turmoil in the impoverished Arab country during months of protests demanding the end of President Ali Abdallah Saleh's 33-year rule has undermined Nexen's efforts to get a renewal for its licence in Block 14 in the Masila oilfield, Yemen's largest.

Canada's sixth-largest oil company still has production in East Al Hajr, or Block 51 in Yemen.

A new oil minister was appointed under an agreement brokered by Yemen's wealthy Gulf neighbours, where the opposition and Saleh's party is dividing cabinet posts between them in a coalition government to steer the country until elections next February. Saleh's party retained control of the oil ministry.

On Wednesday, Yemen's vice president issued a decree to set up a national unity government to prepare for elections, which are set for February 2012. A new oil minister was also appointed.

"They will be making decisions on how to run their energy business... I think with this much transition... it's a time to be patient," Romanow said.

Yemen is a small, non-Opec producer with approximately 260,000 bpd of oil production which has been in steady decline since 2001, when it hit a peak of 440,000 bpd. At Masila alone, total production peaked in 2003 at 225,000 bpd.

But Romanow said the country had more potential.

"I think the country is still generally under-explored...The reservoirs in Yemen are excellent reservoirs and our recovery factors are actually very high," he said.

As of January 2011, the country has 3 billion proven crude oil reserves. There was also room for enhanced oil recovery (EOR) in Yemen as well, Romanow said.

"In most EOR projects you need an investment framework where you can see out 20 years...and you have to be confident that investment makes sense over that time horizon," he said.

Yemen's main oil pipeline carrying Marib crude to the main export terminal Ras Isa, on the Red Sea coast, is shut down following consecutive explosions, forcing the country's largest refinery shut.

Ash Shihr export terminal, where Nexen is exporting from, is still operating.