134
As at the date of the Offering Memorandum, since there has been no production at each of Mansuriya, Siba and Block 9,
the Group’s “R” ratio is below 1.0.
A 35% corporate income tax is applied to each contractor’s remuneration fee. A number of barrels of oil equivalents
valued at the amount of these tax payments is included in the Group’s 2P net entitlement reserves but is also accounted
for as a reduction in the net present value of the Group’s future net revenue, as prepared by GCA. In addition, under all
of the service contracts, the contractors are required to pay a non-recoverable training fee of $1 million per year to the
Iraqi Ministry of Oil. Under the Block 9 contract, the JV partners were required to pay a signature bonus of $25 million
to the Iraqi Ministry of Oil. Payment of these costs is split amongst the JV partners on the basis of their working interest
percentages.
Yemen
Summary
In Yemen, the Group is currently producing oil from its Block 43 and Block 5 assets. Yemen generated 19.5% of the
Group’s average daily working interest production and 23.4% of the Group’s revenue in the three months ended 31
March 2014, and 21.5% of the Group’s average daily working interest production and 26.3% of the Group’s revenue in
2013. Due to the security situation in Yemen, the Group ceased exploration, appraisal and development operations in the
country during the course of 2011. Although the Group resumed full operations in Yemen in 2012, the security situation
has remained challenging. See “
Risk factors—Risks relating to the jurisdictions in which the Group operates
—
The
security situation in Yemen has in the past caused, and may again cause the Group to cease exploration, appraisal and
development operations in the country, and may affect the validity of the Group’s licences if it is unable to obtain and
maintain effective security arrangements for Group personnel and assets in the country.
”
The Group holds working interests in four licences in Yemen, each of which are governed by PSCs. A Group company
is the operator of two of its four licences. The Block 5 licence area is one of the Group’s most significant production
assets, representing approximately 19.1% of the Group’s average daily working interest production in 2013 despite being
shut down for 47 days due to sabotage of the main export pipeline. In February 2014, the Group’s production in Block
43 in Yemen was again suspended due to export pipeline sabotage, and development work was suspended for security
reasons. Collection of 3D seismic data in Block 82 has also been suspended for security reasons. Block 5 represented
17.9% of the Group’s average daily working interest production in the first three months of 2014.
In 2012, the Group relinquished Block 74, as it had no further prospects. In 2013, the Group relinquished Block 83.
The map below presents an overview of the Group’s operations in Yemen.
