A march in Yemen’s capital, Sanaa, calling for President Ali Abdullah Saleh to leave office was attacked by pro-government supporters last night. The implications of spiralling troubles and unrest on inward energy investment for the gas exporter could be catastrophic, following years of relative success in ramping up energy production.Â
International press outlets have speculated that the fall of Egypt’s Hosni Mubarak, who stepped down on Friday after 18 days of mass protests, was likely to lead to similar scenes across the MENA region.
Yemen has recently witnessed demonstrations for greater freedoms and improved living standards.
However, fears that the protests could escalate have been exacerbated by the potential impact on energy markets. Yemen is emerging as an important LNG exporter, and sits just outside the strategically sensitive Straits of Hormuz.
According to the Yemen News Agency the government was already in talks with its major LNG project stakeholder, Total, in Sana’a on Saturday (Feb 12th) Â to discuss altering the price of Yemen liquefied natural gas. Greater government revenues may allow for more domestic spending on social projects in areas deemed underprovided for by the state, a common source of discontent throughout the recent flare-ups.Â
On Staurday Yemen’s Minister of Oil and Minerals Amir al-Aydarus met with Total’s head of gas and power division Philippe Boisseau.
No mention of the protests in Sana’a were acknowledged in the Yemen News Agency statement, just that Boisseau had said early stage discussions would centre around increasing the government’s revenues from gas sales.
Total leads the Yemen Liquefied Natural Gas (LNG) project with a 39.62% share. Other partners are the American firm Hunt Oil (17.22%) the Yemen Gas Company (16.73%), and various South Korean energy partners.
Yemen: Energy Profile
The US Energy Information Agency profile on Yemen notes that its location on the Bab al Mandab, one of the world’s most strategic shipping lanes, through which an estimated 3.7 million barrels of oil pass daily, makes Yemen important to the global oil trade.
Disruption to shipping in the region could prevent tankers in the Persian Gulf and the Gulf of Aden from reaching the Suez Canal/Sumed pipeline complex, requiring a costly diversion around the southern tip of Africa to reach western markets.
The country’s economy is heavily dependent on hydrocarbons, which account for 25 percent of GDP, over 70 percent of government revenues, and over 90 percent of foreign exchange earnings.
Yemen is actively seeking to increase foreign investment in its energy sector, and local tensions will not be helping. According to the EIA country profile, declining oil revenues are weakening the government’s ability to provide basic services.
Yemen has 16.9 trillion cubic feet (Tcf) of proven natural gas reserves. Most of Yemen’s natural gas reserves are concentrated in the Marib-Jawf fields, with 10 Tcf of proved reserves according to Yemen LNG. Success in developing the liquefied natural gas (LNG) sector is likely to increase opportunities for further natural gas exploration and production. LNG exports are projected to offset Yemen’s falling oil export revenues in 2011, when Yemen’s LNG project reaches full capacity.
According to Global Insight, Yemen produced an estimated 365 billion cubic feet (Bcf) in 2009 and domestically consumed 36.5 Bcf. Prior to 2009, Yemen produced only associated natural gas, practically all of which was reinjected to provide enhanced oil recovery. A long-term LNG sales contract with Korea Gas Corp., signed in 2005, provided both the impetus and the investment needed to begin developing Yemen’s natural gas reserves for the export market. Yemen also signed contracts with Swiss GDF Suez Company and lead developer, Total, whose LNG shares are slated to be shipped to the United States. All three contracts run for twenty years.
According to Cedigaz, Yemen exported 18.9 million cubic feet (MMcf) of LNG in 2009. Yemen’s first LNG plant went online in October 2009, at the port of Balhaf on the Gulf of Aden. The first cargo of 5.1 MMcf (147,000 cubic meters), was shipped to South Korea at the beginning of November 2009, almost a year behind schedule.
Several more LNG shipments were made in December 2009, to Spain, Mexico, and South Korea. Other LNG deliveries have since been made to China, Texas, and most recently, Boston. An estimated 5 MMcf of LNG arrived at GDF Suez’ Everett terminal in Boston on February 23, 2010.
Yemen LNG has 4 tankers with a total capacity of 13 MMcf. A second liquefaction unit, currently under construction,is expected to become operational towards the end of 2010, according to Yemen LNG. Yemen will be able to export 6.7 million metric tons of LNG when the project reaches full capacity in 2011.
The Balhaf terminal receives natural gas from Block 18 in the MaribBasin via a 200-mile, 900,000 cubic feet per day capacity pipeline. Block 18 is operated by the Yemeni government. About 9.2Tcf of gas reserves have been earmarked to feed the LNG liquefaction plant. SABA recently reported that Yemen has the ability to export over 200 MMcf of LNG per year.
Yemen profile information sourced from:
BBC
Energy Information Agency
Oil & Gas Middle East
Yemen News Agency
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