Yemen gets Saudi crude oil as fuel shortages spread
Yemen has increased fuel imports after violent unrest in the Middle Eastern oil and gas exporting country cut crude production. The shutdowns have forced the unpopular government to look to neighboring oil export giant Saudi Arabia for fuel.
The first shipment of Saudi crude oil donated to Yemen to help relieve widespread fuel shortages arrived at the port of Aden, trade and shipping sources say.
Saudi Arabia donated 3 million barrels of oil to its impoverished southern neighbour, where months of pro-democracy protests against President Ali Abdullah Saleh’s 33-year rule have sparked clashes between government forces and tribesmen, killing dozens.
Fuel shortages have spread since a mid-March blast on Yemen’s main oil pipeline stopped the flow of Light Marib crude to Aden’s 130,000-barrels-per-day refinery.
“The first tanker carrying 600,000 barrels has arrived,” one shipping source says, adding that the oil would be sent to the refinery, which has been shut for months, to be processed into much-needed oil products.
“This shipment is important as there are power cuts in so many places across Yemen,” a trade source says.
“Yemen coast guard boats are only carrying out occasional patrols in Aden’s harbour and are not going too far out because of fuel shortages,” the trade source says.
“There might be a small trickle, but Mukalla has effectively run out of fuel,” the source says, referring to the southern port town.
To help ease its fuel crisis, Yemen has ramped up imports of oil products, but payment problems have meant shipments have not been able to discharge or arrive on time.
“There is one vessel, which arrived on June 5, carrying 30,000 tonnes of petrol (gasoline), waiting at anchorage,” another shipping source says.
The second shipping source says the discharge of the tanker, along with another vessel loaded with 30,000 tonnes of gas oil, were delayed because of payment problems.
Since the start of the unrest, several Gulf-based traders have been wary of trading with Yemen because of its worsening finances.
The first shipment of Arab Light oil from Opec member Saudi Arabia, the world’s largest crude oil exporter, was unlikely to solve Yemen’s fuel crisis, shipping and trade sources say.
“I understand when they refine this oil, only 20 percent of it, which is around 17,000 tonnes, will be diesel,” the first shipping source says.
“So, in reality it won’t be enough to solve the whole problem,” he says.
At least 50 percent of the crude oil received would be turned into fuel oil, a source says, which would then be sent to power stations. Yemen state TV reported that the crude oil donated by Saudi Arabia was going to be distributed starting from next week.
The tanker which delivered the first shipment was due to return to Yanbu, Saudi Arabia’s Red Sea port, and was likely to reload and deliver a second shipment, sources said, without giving a timeframe.
Soaring petrol prices
Trade sources said petrol prices continue to soar in many parts of the country. A 20-litre drum of petrol cost 5,000 Yemen rials ($23.26) in the capital Sanaa and 7,000 rials in the coastal port of Hodeidah, compared with 1,500 rials in Aden, they say.
“It will take a few more days for the fuel shortages to be alleviated and the number of trucks and cars queuing for fuel at filling stations has continued to grow,” a trade source says.
Any descent into chaos in Yemen, which lies next to major shipping lanes, would alarm Gulf neighbours and Western powers worried about al Qaeda.
Opec Secretary General Abdullah Al Badri urged a speedy political resolution at the Reuters Global Energy and Climate Summit.
“If that problem is not solved now, then we will have a lot of problems – in the safety of shipping going through that part of the world,” Badri says.
Yemen's energy industry
Yemen has increased fuel imports after violent unrest in the Middle Eastern oil and gas exporting country cut crude production.
Yemeni security forces killed two protesters as rallies demanding the departure of President Ali Abdullah Saleh paralysed two major cities.
Sources said Yemeni production of light crude oil, which is already in short supply because of Libyan export cuts, remained shut down and that there were no exports of crude oil out of Yemen’s Ras Isa terminal.
The shutdowns have forced the unpopular government to look to neighbouring oil export giant Saudi Arabia for fuel.
Below are some facts about Yemen – the world’s 32nd biggest oil exporter and 16th biggest seller of liquefied natural gas (LNG) – which lies at the mouth of a key shipping route.
Dependant on oil
The country’s economy is heavily dependant on hydrocarbons, which account for 30 percent of gross domestic product, nearly 75 percent of government revenues, and over 90 percent of foreign exchange earnings, according to the US Energy Information Administration (EIA).
Protesters have renewed calls for southern Yemen, which produces most of the country’s crude oil, to go back to its independent status before unity with the north in 1990.
Yemen had proven oil reserves of around 3 billion barrels as of Jan. 1, 2011, equal to just 0.2 percent of global reserves, according to the EIA, sourcing Oil and Gas Journal. The country’s oil is generally light and sweet.
Oil reserves and production are sourced from two areas: Marib-Jawf basin in the north, and Say’un-Masila basin in the south. The government estimates Masila holds about 84 percent of the national total.
Daily oil production fell to 260,000 barrels per day (bpd) in 2010, or just 0.4 percent of the global total, down from 286,000 bpd in 2009 and continuing its steady decline from a peak of 440,000 bpd in 2001, according to the EIA.
Oil is transported from Masila to Ash Shahir by a 90-mile pipeline with a capacity of 300,000 bpd, while a the 130-mile Shabwa-Bir Ali pipeline carries up to 135,000 bpd from the Ayad-Shabwa block to the Bir Ali terminal on the Gulf of Aden.
Yemen has five oil export terminals. Ras Isa is the main crude terminal offshore in the Red Sea, while the coastal terminal of Hodeidah handles small tankers. The Bir Ali facility handles crude from Shabwa, while Ash Shihr, operated by Canada’a Nexen ships oil from Masila. Nexen said it has halted oil production on May 8 because of a workers’ strike.
The state-operated Aden Refinery Company, which also manages Yemen’s strategic fuel reserves, has an old refinery with a capacity of 130,000 bpd, while the Yemen Refinery Company’s newer Marib can refine 10,000 bpd of crude.
Yemeni and Chinese officials have discussed upgrading the ageing Aden refinery to process Kuwaiti and Masila crude, which may cut Yemen’s fuel imports and boost exports.
Yemen is a regular buyer of oil products, with imports of around 30,000 tonnes per month, but the recent fuel shortages have forced the country to import more.
In the first week of May it opened a tender to buy 105,000 tonnes of oil products.
An estimated 3.5 million bpd passed through the narrow Bab al Mandab strait btween Yemen and Djibouti in 2010, according to the EIA.
Disruption to the narrow shipping lane could stop Gulf oil and LNG tankers from passing through the Suez Canal to the Americas or Europe.
It could also prevent oil tankers from unloading at Egypt’s Ain Sukhna terminal near the southern entrance of the Suez Canal which feeds crude to Sidi Kerir on the Mediterranean coast of Egypt via the Sumed pipeline.
About half of the Sumed crude comes from Saudi Arabia and is mostly shipped to Europe, according to the pipeline operator.
Yemen has proven gas reserves of 16.9 trillion cubic feet as of January 2011, according to the Oil and Gas Journal, or about 0.3 percent of the global total in 2009, according to BP statistics.
Most of the gas is found in the Marib-Jawf oilfields and it is mostly reinjected to enhance oil recovery. Gas production has been in decline since 2005.
Yemen LNG’s export facility at Balhaf, which opened in 2009 and is led by French oil major Total with three South Korea companies holding stakes, is the largest-ever industrial project in Yemen.
It exported just 0.40 bcm of gas as LNG in 2009 (compared to nearly 50 bcm by world leader Qatar) but a production line added in 2010 and another expected to open in late 2011 is expected to boost annual capacity to 6.7 million metric tonnes, or 8.28 bcm of gas a year.
One of the pipelines feeding gas from the Marib field to the LNG plant was attacked in 2010.
Foreign companies involved
According to the EIA, the companies involved in Yemen’s energy sector include: Canada’s Calvalley Petroleum, Nexen and Epsilon Energy ; US-based Hunt Oil and Occidental Petroleum, India’s Reliance , China’s Sinopec , France’s Total , Norway’s DNO , Italy’s Eni , Korean National Oil Company , Hungary’s MOL , Australia’s Oil Search , Austria’s OMV , Greece’s CCC, Britain’s Dove Energy and Kuwait Energy.