The Sydney-based junior this morning announced it had agreed to purchase a 100% participating interest (82.5% equity interest) in the Damis production licence, Block S-1, from US major Occidental Petroleum Corporation and Canadian concern TransGlobe Energy Corporation.
TransGlobe has been in the concession since acquiring its initial interest in 1996.
The Damis licence is just 80km south-west of Petsec's initial holding in Block 7.
Block S-1 contains the five sizeable oil and gas discoveries.
The An Nagyah oil field was discovered in 2002-03 and produced between 2004 and 2014, until ongoing civil strife saw it suspended.
The field has produced 25 million barrels of oil to date from 25 wells, including some horizontal producers, reaching a peak oil rate of 12,716 barrels of oil per day in March 2006.
Al Nagyah produces light oil from the Lam A and Lam B formations.
The field was producing at a limited rate of 5000 bopd at an estimated lifting cost of $US7.50/barrel when it was shut in at the end of February 2014 following two attack on the sales pipeline. At the time the operator said the pipeline attack related primarily to unresolved contractor issues with local tribes.
There are a further four undeveloped oil and gas fields within the licence area: Osaylan, An Naeem, Wadi Bayhan and Hamel.
Petsec says the field can easily continue production well beyond 2023 when the initial term of the production licence expires.
DeGolyer and MacNaughton, which produced reserves reports for TransGlobe has been commissioned by Petsec to undertake an economic reserve audit of the block.
Petsec is paying a mere $US700,000 ($A972,000) for the interest, plus trailing payments, subject to the recommencement of production and other conditions precedent.
As with many oil fields in Yemen the block is currently subject to force majeure due to the political issues in the nation and the consequent inability to ship oil from the west coast of Yemen, the export pipeline terminus for the An Nagyah oil field.
Just two weeks ago an attack on the attack on the Ras Isa complex, Yemen's main oil export terminal, led by a Saudi-led coalition fighting in Yemen bombed the oil facility on the Red Sea which is operated by Houthi rebels.
Nine people were killed in the bombing of the oil tanker facility, destroying trucks that deliver petroleum products for domestic consumption from the port city of Hodeidah.
Ras Isa has been unable to ship oil since March 2015 when a coalition of Arab states launched a military campaign in support of president Abd-Rabbu Mansour Hadi against the Iran-allied Houthis.
The United Nations says nearly 6000 people have been killed in the fighting, which began after the Houthis advanced on the southern port city of Aden. Hundreds of thousands of people have been displaced in the conflict.
Al Qaeda militants are also active in the south-east of the country.
Petsec's Middle East business CEO, Maki Petkovski, who was appointed to develop the company's MENA portfolio, said Damis was a material acquisition, one that would provide further major development opportunities.
"The block contains significant existing infrastructure, including surface facilities with a capacity to process up to 20,000bopd and an 80,000bopd pipeline which joins the 200,000bodf Marib export pipeline to the Ras Isa terminal on the Red Sea coast, to the West," he said.
"The Marib pipeline was the export pipeline for Damis Block S-1 crude sales until production was suspended in 2014. Excess capacity exists in the Marib export pipeline for restart of the An Nagyah oil field and for future development of the remaining undeveloped oil fields in the Damis (Block S-1) block."
He said Petsec intends to restart production as early as is feasible, either by piping or trucking or a combination of both, even while conflict exists elsewhere in the country.
It just requires the political situation to settle down enough that shipping and refinery acceptances recommence in Yemen.
Petsec chairman Terry Fern, who has been at the helm of Petsec since the beginning when it was a Canning Basin explorer in the early 1980s, said it had taken over a year to come to an agreement with Oxy and TransGlobe for the block.
He is optimistic that production can resume this year, although Fern had also been optimistic that operations in Block 7 could resume last year. Unfortunately the conflicts in Yemen appear to be intractable.
Hadi vowed this week that the national army and pro-government Yemeni National Resistance, backed by the Saudi-led coalition, will not stop their current military offensives until the capital Sana'a is completely liberated from the rebels.
Government forced are reportedly closing in on the capital, and Hadi said that that "the republican regime will win, no matter how big our sacrifices may be, and defeat the remnants of the backward clerical imamate regime that came out of the caves of history".
In the southern port city of Aden, fighting erupted on Tuesday night between government forces and Al Qaida fighters after authorities set up roadblocks as part of a security plan.
Al Qaida has captured several towns in southern Yemen since the beginning of the country's civil war.
Taiz, Yemen's third largest city, which is also under siege by Houthi rebels loyal to ousted president Ali Abdullah Saleh.
Fern says production from An Nagyah will provide the necessary capital to develop the substantial oil reserves Petsec has secured in Block S-1 in the Marib Basin and Block 7 in the Sab'atayn Basin.
Petsec initially secured its entry to the Block 7 by signing separate agreements with AWE (21.25%), Mitsui (8.5%) and more recently former operator Oil Search (34%) offered to sell out to allow Petsec to move to a 63.75% operating interest.
It has budgeted some $3 million to test the two suspended Al Meashar-1 wells, and for work to prepare the 100MMbbl plus Omega prospect for drilling.
Past testwork of Al Meashar-1 suggested flows of up to 1000bopd, however Al Meashar is similar to OMV's nearby Habban oil field, located 14km to the west of Al Meashar, which had been producing at rates of 23,000bopd before it too was shut in.
In order to undertake the work Petsec and its partners will need approvals from the government, and that seems unlikely until the authorities are in control again.
At the end of the last quarter Petsec had around $12.8 million in the bank.
