The Government of Yemen has rejected Canada-based Nexan‘s application to extend its production sharing agreement (PSA) on block 14 (Masila), which will expire on 17 December 2011.

The block will now be operated by a newly created national operating company.

The expiry of the PSA will not have any effect on Nixon’s reserves because the firm did not book any barrels beyond the PSA term, according to Nexan.

The reduced production from Masila will also be offset with the start-up of the Usan project, offshore West Africa, which will begin production in the first half of 2012.

Nexan’s share of production for this year will be between 24,000 and 28,000bpd.

The company still has a PSA covering block 51 in Yemen, which contains the East Al-Hajar oilfield; this PSA expires in 2023.