Deutsche Bank said there was still big potential for large oil discoveries in the Yemen, following European-based OMV’s recent discovery of a 622-metre oil column in a block neighbouring Oil Search’s properties.

“Whilst Yemen’s major oil producing contracts are set in an apparently irreversible decline, there are a number of independents reaping the benefits from small, prolific oil fields, low development costs and the high oil price,” the investment bank said in its report.

Yemen’s oil production stems from two sedimentary basins – the Marib Shabwa basin in west-central Yemen and the Sir Sayun basin, about 400km to the east. Production peaked in both basins between 2001 and 2003 and are now in a steady decline, Deutsche Bank said.

But the investment house believed smaller independent producers, and not oil majors, would continue to reap the success of untapped reservoirs, thanks in part to new technology.

“It has been the application of geological, seismic and other technical expertise, which has led to this revival in exploration performance, particularly in the Sir Sayun basin,” said the report.

“Operators such as DNO, Nexen and Vintage have successfully identified new plays and subtle traps, which had been overlooked or misinterpreted in the past and reconsidered reservoirs that had previously been discounted as non-commercial.”

The commercial success rate from exploration drilling over the last five years has been around 30%, which the report said was respectable in basins now past their peak.

Of particular interest, it says, is a renewed focus on the Basement potential, which underlies primary Jurassic reservoirs.

The Basement stratum has unpredictable, variably fractured reservoirs that have sometimes produced high flows in short-term tests but have generally failed to prove commercially viable under appraisal or extended test conditions.

However, the Basement has recently produced significant quantities of oil in neighbouring permits and analysts believe it could prove commericially viable at Nabrajah.

After drilling a series of successful Nabrajah wells, Oil Search and its operator DNO, a Norwegian company, have now spudded Nabrajah-8, the first of four back-to-back wells in the Basement development program.

Nabrajah-8 is 1.6km east-northeast of Nabrajah-5 and will be drilled as a near-vertical well.

It is intended to delineate the height and lateral extent of the oil column intersected by Nabrajah-5 by drilling up to 1000 metres into the Basement formation, and to provide data on the lateral and vertical characteristics of the Basement fracture system.

According to Deutsche Bank, Yemen’s advantages included: low capital and oil costs, thanks to its onshore location; short payback periods, due to nearby infrastructure; an established transport network; the high oil price; and balanced fiscal terms.

Joint venture partners in the Nabrajah-8 well are: DNO (operator and 56.7%); Oil Search (28.3%) and the Yemen Company (carried for 15%).