Zenith Energy Ltd., an international energy production and development company, said Monday it terminated the share purchase agreement ("SPA") with OMV Yemen Block S 2 Exploration GmbH.
The company justified its withdrawal from the agreement, saying, "the conditions required for completion of the SPA not being satisfied." According to the company's statement, OMV has refunded the deposit of US$4,323,800 plus accrued interest to Zenith.
As the nine-year conflict in Yemen continues unresolved amidst formidable economic challenges, foreign investors, particularly petroleum companies, find little incentive to come to Yemen, which has a discouraging investment climate. In October of Last year, the Ansar Allah (Houthi) group in Yemen began striking oil terminals in Hadramout and Shabwa, causing massive losses for the oil sector in the country. Oil production has shrunk, and its exportation has ceased.
On January 4 of this year, Zenith Energy Ltd. announced that it entered into a share purchase agreement with OMV Exploration and Production GmbH to acquire 100% of the outstanding share capital of OMV (Yemen Block S 2).
At the time, Andrea Cattaneo, Chief Executive of Zenith, said, "The acquisition of OMV Yemen represents a very significant milestone for Zenith Energy." He also said Zenith was enthusiastic about establishing itself in Yemen and contributing to the prosperity of the local economy.
Oil Production in Block S-2
Bock S-2 is situated in the Erma District of Shabwa province. It was discovered in 1992 by Oxy, an American petroleum company, and was declared commercial in 2005 by OMV.
When the civil war in Yemen broke out in 2015, drilling new wells had stopped, and production was temporarily suspended. In 2018, production activities began anew at an average gross rate of 17,500 barrels of oil per day. However, the drilling activities declined again in 2021 and 2022.
The gross production of Block S-2 during 2021 was approximately 7,400 barrels of oil per day. As of January 1, the production was roughly 6,000 barrels of oil per day.
No. of Barrels Per Day