Yemen oil, gas sector needs suitable remedies
Tuesday, 15 May 2012 | 00:00
Yemen has launched efforts to develop the oil and gas sector, which is considered as the backbone of the national economy after the 2011 unrest deepened the country's woes.
Within the efforts, the government has been meeting with oil and gas companies to urge their concessions and an increase in oil and gas production to boost the economy. Preparations have also been underway to hold meetings to promote investment for Russian, British, U.S. and Indian oil and gas firms this year.
When it took office in December, the power-sharing government revealed plans to develop the oil and gas exploration and production operations to attract new investors. In its program which was approved by the parliament, the government focused on expanding the gas production to bring in more revenues and to generate electricity.
Yemen is a small oil and gas producer at the moment, but its oil ministry has said about 85 percent of the country's land has not been explored, and, with 12 basins, it currently produces oil and gas only from two - the Marib-Shabwa and Masila basins.
The oil ministry also revealed recently that there are 12 producing blocks, 31 exploratory blocks and 60 blocks open for investment.
Oil revenues make up more than 70 percent of the state budget, and oil and gas products account for more than 90 percent of the country's exports. In addition, it has the Balhaf LNG project which produces and exports 6.7 million metric tonnes a year.
Despite the current challenges, developing the oil and gas sector, especially increasing production, is not impossible, with officials and experts saying that the situation just requires suitable remedies; immediate robust reforms and strict measures by the government.
According to an official at the petroleum exploration and production authority(PEPA), some companies can increase production since their studies have indicated to the possibility.
Economists said the plans to develop the oil and gas sector are good but all remedies should live up to the challenges affecting the national economy as Yemen needs a long time to develop the non- oil sectors.
More recently, reports including official and World Bank ones have warned of the depletion of the current oil reserves in almost a decade and the impact of the security on attracting more investors to the Yemeni oil and gas sector.
The oil ministry responded by saying that the reports warning of oil depletion were untrue because studies have indicated large oil and gas potential in Yemen, which is yet to be discovered and used. Some of the studies estimated the oil reserves at more than 9.1 billion barrels and the gas reserves at more than 18 trillion cubic feet (about 510 billion cubic meters).
Yemen's oil production rapidly declined from more than 400,000 barrels per day at the beginning of the past decade to the current 270,000 barrels per day.
Mustapha Nasr, head of the studies and economic media center, said the government should start necessary measures to develop this sector and increase production because the country has large oil and gas reserves. "Only a small part of the country has been explored, for this, large reserves require big efforts including how to learn from others' experiences in exploring and producing oil and gas," he said.
The lack of tools remains among other problems affecting the development of this sector at the moment, which include the bad management of resources, the security situation and corruption.
More recently, a report to be discussed at the donor meetings in Saudi Arabia later this month, expected the oil and gas sector will see a minus 3.6 percent growth, with the improvement of security on top of the key reasons for that.
Corruption and bad management of national resources have been widespread at all public offices in Yemen, especially the energy sector. Experts said senior officials within the former regime had shares in oil companies operating in the country and a large part of oil revenues.
"If there is a good management of the national sources, the country will increase production, not deplete the reserves," said the PEPA official.
He pointed out that "one of the big problems of this sector is that the Yemeni authorities totally rely on foreign investors to study and explore Yemeni areas; the point is that there is no local supervision or participation in such operations."
At the meantime, the security situation remains the biggest concern affecting investments here amid persistent attacks on pipelines and facilities by tribesmen and militants.
The country's gas and oil projects are based in tribal areas and some projects and oil and gas pipelines are subject to direct attacks by tribesmen to pressure the government to meet special demands, usually release of detainees, supply of basic services and jobs at oil and gas firms.
Some pipelines, such as the Marib oil pipeline, are attacked repeatedly at the same area and by the same group and this exposes the absence of state influence in parts of the country where key projects are located.
This pipeline was repeatedly attacked last year and stopped pumping in last October. Its shutdown force five producers to halt their operations and has been behind fuel shortages.
The impact of such attacks can also be seen through the import of oil products to meet the local demand. Yemen currently exports 160,000 barrels per day but the most part of the revenues go to buy oil products since the Marib pipeline is still down.
The tribal acts, which also include road closures and seizing crude tankers, have proved to need strict measures, not the acceptance of the government to meet such demands.
Besides the tribes, al-Qaida militants sometimes retaliate for deadly strikes through attacking oil and gas pipelines and projects.
Despite the reinforcements and high security at such projects, militants proved to be cleverer, for example, they attacked the main LNG pipeline twice in less than a month.
Source: Yemen Times