RIL sells stake in Yemen oil block to Indonesian firm

Reliance Industries Ltd (RIL) has sold its 25 per cent stake in an oil block in Yemen to Indonesia’s Medco Energi for about $90 million (Rs 497 crore), the firm’s second overseas stake sale in one month.

RIL’s Dubai-based subsidiary, Reliance Exploration & Production DMCC, last month signed agreements to sell 25 per cent interest in producing Block 9 in Yemen to Medco Energi, industry sources said.

The stake sale follows billionaire Mukesh Ambani-run firm exiting two oil blocks in the Kurdistan region of Iraq on July 19.

RIL had in 2001 won Yemen’s Block 9, along with Hood Energy and Calvalley Petroleum Inc. RIL and Hood Energy held 25 per cent stake each, while Calvalley had the remaining 50 per cent.

Sources said RIL’s sale agreement with Medco would be effective January 1.

While the agreement is for a 25 per cent interest, Medco would effectively have a 21.3 per cent participating interest in the block, because, under a regulation in Yemen, the contractor of a production-sharing agreement has to accommodate a working interest for the country, which is represented by 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 21.3 per cent stake.

Block 9 covers 2,234 sq km in the Sayun-Masila basin in Yemen’s Hadramaut province, about 350 km north-east of the Yemeni capital, Sanaa. It is estimated to hold proven plus probable reserves of 58.6 million barrels of oil.

RIL would get another $5 million if the block produces 10,000 barrels of oil per day (bpd). The block currently produces between 6,000 bpd and 6,500 bpd.

A 20-year construction contract was granted over the block by the Yemeni government in 2005, which the joint venture can apply to have extended for a further five years after 2025.

After the sale, RIL was left with interest in block 34 and 37 in eastern Yemen where it is investing $66 million with its patner, Hood.

RIL had last month sold its 80 per cent interest in Rovi and Sarta onland blocks in northern Iraq to US oil behemoth Chevron Corp for a reported $200 million.

The exits are part of the company’s overseas asset restructuring, wherein it is cutting exposure in exploration blocks to focus on producing properties.

After the exit from Kurdistan and Yemen, RIL 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.