Yemen

Published March 27th, 2001 - 02:00 GMT

General Background:  

Yemen's government continues to implement an economic reform program which it agreed to in 1995 as a condition for lending from the International Monetary Fund (IMF).  

 

The program includes banking reform, privatization of state-run industries, major infrastructure investment, and reduction or elimination of government subsidies, including wheat, flour, gasoline, and electricity.  

 

Yemen's economic situation has been improving in the last two years, partially due to the recovery in oil prices. Yemen's real gross domestic product grew 6.2 percent in 2000, and it is projected to grow 5.4 percent in 2001. 

 

Yemen's current economic reforms follow a period of political instability and civil war. In May 1990, the former independent states of North and South Yemen reached a unification agreement, creating a new united Republic of Yemen.  

 

However, political disputes between President Ali Abdallah Saleh and Vice President Ali Salim al-Baidh led to armed clashes between northern and southern forces in April 1994, plunging the four-year-old country into a full scale civil war by May 1994.  

 

The war ended in July 1994 after the fall of Aden, the former capital of South Yemen and the stronghold for forces loyal to Vice President al-Baidh. 

 

Current instability mainly centers on periodic kidnappings of foreigners, including oil workers, usually by Yemeni tribesmen. Kidnappings have hurt the country's important tourism sector.  

 

Besides kidnappings, there have been attacks on an oil pipeline in the Marib region of eastern Yemen, though the frequency of attacks declined in 2000. The pipeline is operated by U.S.-based Hunt Oil.  

 

Under terms of its agreements with the IMF and World Bank, Yemen is required to initiate a privatization program. The government has said that it will encourage private investment in the agriculture, fisheries, oil, and tourism sectors, and sell off its stake in companies throughout the Yemeni economy.  

 

Some companies will be offered for tender or auction, while others will be sold by private subscription.  

 

The government also stresses that it is seeking both foreign and local investors.  

 

State-owned businesses cited as candidates for privatization include farm and agricultural cooperatives, construction companies, power stations, public housing facilities, refineries, the state's petroleum retail network, shipping companies, and the state telecommunications company.  

 

Progress toward privatization, however, has been slow. The Yemeni government has recently indicated that the Aden Refinery will be included in the next round of privatizations, with a majority stake in the company to be sold.  

 

Yemen and Saudi Arabia recently resolved their longstanding border dispute. In a treaty signed in June 2000, the two governments agreed on the delineation of sections of their common border which had been in dispute since the 1930s.  

 

The deal is expected to open up opportunities for increased Saudi trade and investment in Yemen, as well as to make possible the award of oil and gas exploration rights for areas in Yemen adjacent to previously disputed areas of the border.  

 

Oil: 

Yemen's oil output, which stood at 440,000 barrels per day (bbl/d) for 2000, provides the country's main source of hard currency revenue. The country contains proven oil reserves of 4 billion barrels.  

 

Reserves are concentrated in five areas: Marib-Jawf Block 18 (490 million barrels) in the north, East Shabwa Block 10A (180 million barrels) and Masila Block 14 (500+ million barrels) in the south, and the Jannah Block 5 (345 million barrels) and Iyad Block 4 (135 million barrels) in central Yemen.  

 

The Masila block is the country's most productive oil field at around 230,000 bbl/d, followed by Marib-Jawf at 160,000 bbl/d. Smaller fields include Jannah, Haliwah, East Shabwa, and Iyad.  

 

Yemen's oil production is split between five operators: Hunt Oil, Hunt/Jannah, TotalFinaElf, Nimir Petroleum, and Nexen (formerly Canadian Occidental). 

 

Nexen, which owns 52 percent of the Masila block, and Hunt Oil (operator of Marib) are the largest producers, accounting for around 230,000 bbl/d and 160,000 bbl/d, respectively.  

 

TotalFinaElf produces around 30,000 bbl/d from its East Shabwa concession. Nimir Petroleum recently announced its intention to leave Yemen, due to unsuccessful efforts to expand production, and has relinquished drilling rights in Blocks 16, 29, and 33.  

 

It is to divest its interest in Block 4, where production has fallen to 700 bbl/d, possibly to the Yemeni government.  

 

Oil exploration activity in Yemen has accelerated since 1997, after a downturn during the mid-1990s due to Yemen's brief civil war.  

 

In April 1998, Nexen entered an agreement with Kerr-McGee Yemen, acquiring interests in two exploration blocks near the Nexen-operated Masila Block. 

 

Each company obtained a 47.5 percent interest in Block 50 and a 43.75 percent interest in Block 51, with the Yemen Ministry of Oil holding the balance for both blocks.  

 

Block 51 is adjacent to the Masila Block and consists of two million acres. Block 50 covers more than 8 million acres and is located northwest of the Masila Block.  

 

In October 1999, Algeria's Sonatrach signed an agreement with Italy's ENI on sharing exploration and production in southern Yemen.  

 

In December 1999, ENI, which has been operating in Yemen since 1995, signed a PSA with Yemen's oil ministry on Block 2 al-Maber, located onshore in the Shabwa basin.  

 

Seismic survey work has been completed and the results are currently under evaluation. In September 1999, Yemen's government also signed a memorandum of understanding with Australia's Oil Search Ltd and the UAE's Mohammed al-Otaibi Group to explore for oil in Yemen's offshore Block 15.  

 

Another MoU was signed in November 1999, between Yemen and Adair International Oil and Gas of Houston, on Block 20 near the Marib block. Seismic survey work is underway.  

Norwegian independent DNO recently began production at the Tasour field in Block 32, which came onstream in November 2000 at 12,500 bbl/d.  

 

Dove Energy of Britain reported a discovery in December 2000 in Block 53 in eastern Yemen, which tested at a rate of 16,000 bbl/d. The company expects to announce a reserve estimate for the field in the first half of 2001.  

 

Yemen's border demarcation treaty with Saudi Arabia has opened up new areas to exploration. Four new blocks have been demarcated along the border, and several companies have expressed interest in exploring them.  

 

Nexen signed a memorandum of understanding with Yemen in January 2001 covering Block 59, located adjacent to the Saudi border. Nexen will hold a 60 percent interest, with the other 40 percent held by Occidental Petroleum (of which Nexen is no longer a subsidiary).  

 

Refining:  

Yemen currently has a crude refining capacity of 130,000 bbl/d from two small, aging, deteriorating refineries. The refinery in Aden, operated by Aden Refinery Company (ARC), has a capacity of 120,000 bbl/d, while capacity at the Marib refinery, operated by Yemen Hunt Oil Company, is 10,000 bbl/d.  

 

The Aden refinery, which had a design capacity of 170,000 bbl/d, sustained significant damage during the country's 1994 civil war, but was later partially rebuilt.The Yemeni government plans to privatize the Aden Refinery, possibly in 2001.  

 

Yemen granted regulatory approval for an export-oriented refinery in Hadramaut with a capacity of 60,000 bbl/d. The consortium backing the project includes the China Petroleum Engineering Corporation and the Al-Kuthairi Group of the United Arab Emirates.  

 

The $500-million project is scheduled for completion in 2003, with China as the intended market for the refinery's production. Another refinery project planned for Ras Issa on the Red Sea has not moved forward.  

 

Natural Gas:  

With natural gas reserves of 16.9 trillion cubic feet (Tcf), Yemen has considerable potential as a natural gas producer and exporter. The bulk of Yemen's gas reserves are concentrated in the Marib-Jawf fields, operated by the Yemen Exploration and Production Company (YEPC).  

 

There is currently no production of natural gas in Yemen, and the gas which Hunt Oil extracts as a by-product of oil production at these fields is reinjected.  

 

In early 1996, France's Total (now TotalFinaElf) and Yemen's General Gas Corporation set up Yemen Liquefied Natural Gas Company (Yemen LNG) to operate a $5-billion liquefied natural gas (LNG) project.  

 

The venture, Yemen's largest single energy project, is to develop natural gas from the Marib-Jawf and Jannah fields, and transport it via pipeline to a natural gas processing plant and export terminal in Bal Haf on the coast of southern Yemen.  

 

The Yemeni LNG plant is to have an export capacity of 0.26 Tcf per year. The consortium making up Yemen LNG consists of TotalFinaElf, Yemen Gas, Hunt Oil, ExxonMobil, and Yukong.  

 

Startup of the project was originally scheduled for 2000 or 2001, but weak demand for LNG due to the Asian economic crisis delayed the start of the project. The planned completion date is now 2003.  

 

The primary destination for gas from the facility will be TotalFinaElf's Trombay regasification terminal near Mumbai in India.  

 

In May 1998, Yemen LNG and British Gas International signed an memorandum of understanding setting up the framework for future talks about supplying Yemeni LNG to British Gas' Pipavav LNG import terminal in Gujarat state, India. However, a final agreement has not yet been reached.  

 

Electricity:  

Yemen generated 2.4 billion kilowatthours of electricity in 1999 on installed capacity of 810 megawatts (MW), all of it oil-fired.  

 

Yemen's two largest power plants are the 165-MW power station as Ras Kanatib, near Hodeidah, and by the 160-MW Mukha station. Yemen's generating capacity is inadequate for the country's needs, and a rolling blackout schedule is maintained in many cities. 

 

Government plans for the power sector call for privatizing all generators having a capacity of less than 5 MW and selling generators of 5 MW-20 MW through public offerings.  

In recent years, Yemen has started on some modest projects to expand and improve its power sector.  

 

On July 8, 1997, Yemen's Public Electricity Corporation (PEC) completed work on linking the southern and northern electricity grids. The grid linkage was funded by the Kuwait-based Arab Fund for Economic & Social Development, which provided $54 million of the $64 million required for the project.  

 

Yemen undertook a World Bank-funded upgrade of the Dhaban power plant to 50-MW total capacity.  

 

The Mukalla power project involved the construction of a 40-MW diesel-fired plant, six substations, and the laying of 62 miles of transmission lines.  

 

Wartsila NSD Corporation, the Dutch branch of Finland's Wartsila Diesel, started work on the plant in mid-1997 and construction was completed in 1998. Wartsila also completed the Aden power project, which involves building a 30-MW plant to serve the city's port.  

 

The new plant is part of the redevelopment of Aden, which was heavily damaged in the 1994 civil war. The company won the construction contract in late 1997 from Yemen Investment and Development International, the consortium leading the redevelopment of Aden port.  

 

Adair International was awarded a contract for a 21-MW plant near the port in January 2001.  

 

Yemen continues to face serious power shortages, and has announced plans to reform the country's power sector, and to double power generating capacity. Yemen also has said that it plans to invite offers on the country's first private power station.  

 

Current plans call for the construction of a 400-MW privately-owned gas-fired plant near the Marib oil and gas field. Yemen's government has held talks on the project with Delma Power of the United States.  

 

Energy Overview:  

Minister of Oil and Mineral Resources: Mohammed al-Khadim al-Wajih Proven Oil Reserves (1/1/01): 4 billion barrels  

Oil Production (2000E): 440,000 barrels per day (bbl/d)  

Oil Consumption (2000E): 73,000 bbl/d  

Net Oil Exports (2000E): 367,000 bbl/d  

Crude Oil Refining Capacity (1/1/01): 130,000 bbl/d  

Natural Gas Reserves (1/1/01): 16.9 trillion cubic feet (Tcf)  

Electric Generating Capacity (1/1/99): 810 megawatts (100 percent thermal)  

Electricity Generation (1999E): 2.4 billion kilowatt hours  

Oil and Gas Industries:  

Organizations: Yemen Petroleum Company (YPC) - production and refining; General Corporation for Oil and Mineral Resources (GCOMR) - investment and holding company; Yemen Refining Company (YRC) - refining; General Department of Crude Oil Marketing (GDCOM) - handles government shares of exports; Yemen Exploration and Production Company (YEPC) - contracts  

Major Oil Fields: Alif, Asaad Al-Kamil, Camaal, Azal  

Foreign Company Involvement: Adair International, British Gas, Canadian Occidental, Hunt Oil, Kerr-McGee, Nimir Petroleum, Total, TransGlobe Energy, Vintage Petroleum, Yukong  

Major Refineries (Capacity): Aden (120,000 bbl/d), Marib (10,000 bbl/d)  

Major Ports: Aden, Hisn an Nushaymah, Al Khalf, Mocha, Nishtun, Ra's Isa, Ra's Kathib, Salif  

Major Pipelines: Marib-Ra's Isa Pipeline (pipeline between the Marib fields and the deep sea port of Ra's Isa on the Red Sea), Shabwa-Rudhum Pipeline (pipeline linking the Shabwa fields to the Rudhum terminal on the Gulf of Aden at Hisn an Nushaymah)  

Source : United States Energy Information Administration. 

© 2001 Mena Report (www.menareport.com)

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