Pressure is mounting on French energy giant Total to increase the price it pays for Yemeni liquefied natural gas (LNG), according to Reuters.
The Yemeni state news agency claims that a long standing deal between Total and Yemen’s government over the price paid for LNG is now under review.
Total is one of the main western companies involved in Yemen and played a key role in building Yemen’s $4.5 billion export plant in 2005 – 2009.
Since coming to power in 2012, the new government in Sanaa has complained that deals signed by officials under previous regime undervalued the gas and deprived the state of desperately needed public funds.
Stephane Michel, Middle East president of Total’s exploration and production division, met with Yemen’s oil minister Ahmed Dares in Sanaa last week to discuss altering prices of LNG sold to Total, Saba said without giving details.
Total is the biggest investor in Yemen’s gas export industry through its 40 percent shareholding in Yemen LNG.
Before work on the LNG project began in 2005, Yemen LNG agreed to a 20-year deal to sell 2.05 million tonnes per annum (mtpa) to South Korea, 2.55 mtpa to France’s GDF-Suez and 2.10 mtpa to Total.
Kogas had a five-year renegotiation clause in its oil price- linked contract and last December agreed to a sharp price increase, to nearly $14 per million British thermal units (mmBtu) based on current oil prices from around $3, according to a statement from Yemen’s cabinet.
The contracts signed by Total and GDF-Suez were structured differently; since the two Western firms intended to ship most of the LNG to the United States, their deals were linked to the U.S. Henry Hub gas price index.
Yemen LNG has estimated it will generate around $60 billion in revenues for the Yemeni government over the next 20 years. LNG has become important as a source of foreign currency for the country as frequent attacks on oil pipelines by militants and local tribesmen angry at the government cut oil exports.
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