Yemen ambitious plans to develop energy sector make way amid challenges

Deputy oil and minerals minister Shawki Al-Mikhlafi said this week Yemen has good plans to develop its energy sector while expecting these plans will be brought into effect this year. "There is strong official determination to expand oil and gas exploration and production activities and the recent gas discovery in Jawf governorate confirmed the serious trend to translate the energy sector development strategy into realities," he said in a statement to Saba. The state-owned Safer company has drilled one well in Jawf and the tests showed the well produces 6 million cubic feet of gas a day, he said. "Safer will drill more wells to explore crude reserves in Jawf. Furthermore, we will finalize all arrangements to sign contracts with 18 firms which have recently won competition to operate 20 new offshore and onshore blocks," he said. Yemen currently has 12 blocks producing between 170.000 and 190.000 b/d. Al-Mikhlafi said there is a need to increase Yemen's crude output which is still low due to many problems including security challenges. "We want to attract more investments to increase the output, but we can't do well now. Honestly, oil facilities mostly pipelines have been repeatedly attacked and such attacks raise concerns," he elaborated. "Nonetheless, we are coping with roadblocks and doing our best to go ahead". Yemen is still negotiating with French buyers to increase the LNG price under their long-term contracts to increase its gas income. Yemen LNG, which operates the Total-led LNG plant in Shabwa, has three long-term contracts with Total Gas and Power, Suez GDF and Kogas. Kogas has already agreed to increase the LNG price from $3.15 MMBtu to $12.6 MMBtu in accordance with the JCC index as from this year. "The negotiations with the French buyers are ongoing and we expect agreements with them on new prices in line with global prices soon," he said. Total and Suez signed their contracts in 2005 for a price of $1 MMBtu. Last year, Yemen reached agreements with the two companies to increase the price through diverging LNG shipments from the American market to other markets paying better LNG prices. Most shipments were diverged to Asia. "We respect all contracts and should protect our reputation to attract more investments and that is why we are still negotiating with other LNG buyers," he said. "However, the LNG prices should be fair enough and in accordance with the global prices".