Oil, Gas and Minerals Book by National Yemen Newspaper

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Contents

CONTENTS

Setting Yemen’s Priorities.....................................................................................06 Refining Our Future Success .................................................................................08 Editorial Message...............................................................................................10

Yemen Can Make it Through!.................................................................................12 Exploring Our Potential . .....................................................................................18 Oil Overview....................................................................................................24

Yemen’s Status in the Oil World .............................................................................28 Petroleum & MineralsTraining Center (PMTC) in Yemen.... 36

Petroleum Pedagogy...........................................................................................38 Dynamic Equilibriums in Gas Investment...................................................................42

Yemen LNG: Facts & Figure...................................................................................50 LNG: Exports & Infrastructure...............................................................................54 Decrypting LNG’s Future......................................................................................60 Limestone in Yemen...........................................................................................66 Mineral Deposits in Yemen....................................................................................70

Yemenizing Industries.........................................................................................80

Pioneer in Yemenization.......................................................................................90 Strategic Planning for HR......................................................................................93 Yemen Must Diversify – But How?............................................................................94

Maps & Stats.....................................................................................................100

01 251650 / 01 238070 / 01 238380 / 01 251651

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Foreword:Setting Yemen’s Priorities

Foreword: Setting Yemen’s Priorities

By HE Ameer Al-Aidarous Minister of Oil & Minerals

The oil and gas industry really only took off in post-unification Yemen – so only two decades ago. But everyday we’re making new ground; we’re training more Yemenis, building capacity, filling our databanks, and adding new colours to the map. I believe openness and candour is necessary for constructive discussion and progression, so we should be forthright and honest when we talk of the challenges that the industry has to overcome, but these are teething problems for such a nascent industry, and ones that are explored further in editorial sections of this publication. Prioritisation is telling of the future course of any entity, be it a person, a company, or, as in this case, an entire industry. My priorities, however, are balanced: both upstream and downstream, neither one nor the other. Perhaps it is a diplomatic position, but it is only rational to have parallel development. I should, nevertheless, outline where I am focusing my energies. Exploration is one of my immediate interests, for the industry and the national economy. It is my intention to complete the very partial picture of Yemen’s resource reserves – this is crucial, as well as my desire to gain clarity on areas previously explored with outdated and limited technologies. Ministry interests, however, are not limited to just attracting investment, but extend across social and developmental dimensions as well. The great strides taken in ‘Yemenizing’ our skilled workforce is vital to securing the country’s future business prosperity, inside and outside the industry. Ministry policies can also go further, and may ease strains on national infrastructure, stimulate business growth, and alleviate poverty: a prospective gas ‘gathering centre’ and regulation of gas by-products not only increase the sector’s efficacy and output, but also lead to additional, localised power generation and complement other manufacturing industries. Importantly, I also have personal aims that lie along a meta-industrial axis. At the beginning of my post as minister I felt deeply frustrated that I, and my successors, would simply be ‘walking in circles’ if the nature of the oil industry was not markedly transformed – something I have become determined to change. The proposed transformation is tripartite: develop a coherent long-term strategy, instead of simply reacting to the evolving situation; modernize and optimize the legal framework which the industry operates in, and lastly; a full restructuring and streamlining of the ministry. Evidently, this is an inherently formative time, as the growth and regulation of the energy and mineral industries will tangibly alter the future trajectory of the industry, economy, and nation. The path of the future will be shaped by energy, and it will be lit by its own incandescence – a glowing optimism.

Refining Our Future Success

Mr. Ahmed Abdullah Dares, Vice Minister of MOM Chairman of the 3rd Oil, Gas & Minerals (OGM) Conference Interview by Fakhri Al-Arashi

“Yemen, as a whole, will benefit from this conference – boosting both investor relations and, directly and indirectly, the national economy,” said Mr. Ahmed Abdullah Dares, Chairman of the 3rd Oil, Gas and Minerals (OGM) Conference. Mr. Dares, also Vice Minister of Oil & Minerals, remained positive on the academic and trade contributions that the conference would provide to attract and stimulate new investment in Yemen, as well as, of course, galvanizing the fruitful relationships which are already in place with existing companies. However, his interest quickly moved onto another undiscovered industry that would be showcased at the conference – that of the country’s natural mineral wealth. The mineral sector in Yemen presents a myriad of opportunities in mining resources like marble and limestone. Yemen, he outlines, “is such a promising country with untapped mineral wealth, in which we can invest, with the help of investment partners, to extract lucrative minerals.” Mr. Dares, of course, underlined the inescapable fact that the oil and gas sectors promised faster and more direct trade potential, something which Yemen desperately needs at this time of growth. The ministry of oil and minerals is leading a new attractive investment plan, through direct negotiations with exploration companies, for ten hydrocarbon blocks in Yemen. The standing offer, which will take place on the sidelines of the conference, promises “new horizons for a real investment partnership in Yemen.” “The negotiations will naturally not greatly deviate from the sharing agreements, enshrined in Yemeni law, which are outlined in the PSAs (Product Sharing Agreements),” he affirmed. The 2010 conference also offered a similar amount of opportunities for join investment in the mineral sector, “if only to start diversifying our investment portfolios.” The current portfolio, however, is certainly not modest. It boasts the second largest LNG investment project of its type, after Qatar, with Yemen LNG’s operations in (and from) hydrocarbon block 18. Yemen is, as is overly quoted, relatively new to the petroleum industry. This has been as just a sharp learning experience for the conference chairman as it has for the industry. “The first and the second OGM conferences brought us the experience and knowledge to discover what we need to properly facilitate other similar conferences, which has been informed by relevant statistics and developed according to investors’ business needs.” Indeed, the investor interest and business offers demonstrated in advance of the conference itself, augur well for the event itself, which is part of the government strategy to boost the national economy. The incline of the learning curve has been steep, but it has “ensured steady progression, and helped us refine our future success.”

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Editoral Message

Editorial Message

Auspicious beginnings augur well. This is just as true of the oil, gas, and mineral industries in Yemen as it is of the National Yemen Newspaper – an independent media group that is raising the standards of journalism across Yemen. Our nascent paper has pr duced this supplementary publication only months after its launch. I am exceptionally proud of all the hard work my team has put in to realizing this publication. More importan ly, however, I am endlessly grateful for all the trust, goo will, and encouragement we have received from peers, ministry officials, industry experts, and sponsors in the process of producing this supplement. This volume demonstrates just the ‘tip of the iceberg’ in terms of our ambitions. Our aspirations will progress us beyond resourceful, objective insight, beyond excellence, and beyond that.

Mr. Fakhri Al-Arashi National Yemen Chief Editor

During our promising beginning we have created this book, an aesthetic resource on oil and gas. These resour es are fuelling a brighter future for Yemen.

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Yemen Can Make it Through!

By Norbert Groeschner General Manager, OMV Yemen GmbH

The Republic of Yemen seems to be very determined in alleviating the national economy through fostering constructive and rewarding strategies in the Oil & Gas industry, as the main economic sector. However, there are some natural challenges facing the national government in meeting the current and future industry and trade demands. One of the main challenges will be the establishment of an attractive commercial environment for the utilization of the indigenous gas resources, including, for instance, competitive gas terms which would provide incentives for oil and gas companies to also develop gas discoveries. The Yemeni Ministry of Oil & Minerals (MOM) has recently begun the process to develop a framework for the promotion of gas developments and is currently discussing this issue with oil and gas companies. We are confident that the government represented by MOM will achieve this goal by the end of this year. The establishment of a gas infrastructure that would also allow operators to ship the gas to potential customers certainly represents another main challenge. Moreover, the current situation regarding utilization of local manpower is always an important topic of discussions between the government and operators. Our experience shows that operators are always willing to support the local communities by involving them for any suitable work available. OMV Yemen GmbH, for instance, has a clear human resources strategy to substitute expatriate staff with Yemeni staff, whenever possible. However, this has to follow clear personnel selection and development programs which secure the value of our activities. Temporarily, we might even have to increase the number of Expats to properly train our Yemeni staff. As part of our ongoing training efforts we are also open to assigning well educated and promising Yemen colleagues to our OMV ventures worldwide, to allow them to further develop their skills. OMV Yemen GmbH is working in the petroleum industry and we strongly believe that we have to further develop the skills of our Yemeni staff. The figures are speaking for themselves. Our Yemenization rate reached about 80% during the development phase. Our plans foresee that we further develop our Yemeni staff, so we might be able to even further increase this Yemenization rate throughout our organization. The above clearly shows that one main key to our success will certainly be the development of Yemeni staff at all levels in the organization, including senior positions. A development program with assignments to other countries and ventures contributes to the development of future senior Yemeni staff. This will not be achievable overnight, but needs a well-established and sustainable program and the commitment of both employees and employer. To conclude, regardless of the urgency and significance of any of the stated challenges, as well as those unmentioned, these challenges can definitely be tackled and resolved provided the strong will of the administration will provide a basis to allow further investment in a more stable and reliable environment. For sure, Yemen will be far better off.

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Exploring Our Potential

ngineer Nasser Al-Humaidi is the Chairman of the Petroleum Exploration & Production Authority â&#x20AC;&#x201C; undoubtedly a key figure who will shape the landscape of the energy industry in Yemen. The National Yemen caught him for an interview .

ÂŠ National Yemen

Exploring Our Potential

Thanks for meeting us. I know you don’t have long – let me cut to the chase: A lot of critics and reports on Yemen tell us that Yemeni oil reserves are quickly being exhausted – what’s your response to their claims?

‘‘ ... our oil fields still have a good capacity to produce. But because of the smaller size of our fields, the international oil giants have huge operating overheads.

Quite simply, there are two prevailing views. One is a purely financial or economic – it looks purely at what we see in the ground at the moment, and how quickly we’re getting through it. But this isn’t a technical viewpoint. It doesn’t take into account new exploration activities. The second view, our view, the technical one does. It isn’t so much that we know precisely how much oil there is, but rather that there is, most probably, a lot more oil and gaz there, still undiscovered. So it’s an issue of limited exploration that’s distorting people’s understanding of oil reserves in Yemen? Sort of. That’s a crude generalisation though. Exploration technology is improving. Some oil prospectors don’t extend the coverage of the oil exploration activities as far as they should. There is, however, an overall lack of investment from oil companies – yet over 80% of Yemen is still virgin terrain for oil and gaz exploration. There are 13 different basins in Yemen, although we’re only producing from two of them at the moment. Why do you think there is a lack of investment in exploration, if the likelihood is that there are large oil reserves out here? Well, there is risk in exploration. I mean geological risk. It costs money to drill and explore. Our exploration blocks are multi-layered, and many companies will only ex-

plore a fraction of these layers. That sounds like a fairly common problem – are there no other issues with winning investment for oil exploration in Yemen? Well, OK – I should admit that our reserves are not as big as our Gulf neighbours’, although our oil fields still have a good capacity to produce. But because of the smaller size of our fields, the international oil giants are hesitant to explore here – they have huge operating overheads. This OGM conference hopes to secure interest for further investment – what’s going to happen? Well there will be a series of informative presentations on the ten hydrocarbon blocks we are promoting for exploration... Ten? I’ve read reports that said you’re showcasing 15? That’s a funny story, actually. If you know Arabic you’ll know that ten in English (10) looks remarkably like 15 in Arabic. Whilst its quite common for Arabic press releases to feature English numerals, and so there must have been a mixup between the two. No matter though, we’ve prepared for 15. Right. And whereabouts will these hydrocarbon blocks be? They’re located offshore and on shore. Hmm ... I didn’t think there was much data, experience or infrastructure to support offshore oil operations? There is. In fact there were many recent studies on the Red Sea, although it wasn’t until 2005 that we found potentiality for gas.

Exploring Our Potential

‘‘ ...systems, processing, technology and research on the area has all been updated.

About four years ago there were tenders for offshore blocks, but they failed. At the time they were high cost. However, systems, processing, technology and research on the area has all been updated. So you’re optimistic? At any rate, what, essentially, is PEPA’s role with oil companies? Well it’s three-fold: Technical, supervisory and also as the control arm of PSAs. PSAs? That’s an acronym for? It stands for Production Sharing Agreement. Basically it’s the contract between the foreign oil company and the government. Yemen is the owner of the oil, but because it generally doesn’t have

the capital to Produce the oil it contracts investing oil companies. When the oil is extracted or produced, the revenues are split up as per the PSA’s terms. After the company’s investment costs are reimbursed from the funding, the profit margin is split between the government and the company. Usually the majority goes to the government, however, we feel that this is the best financial model to encourage investment and growth – certainly over other models, like ‘concessional agreements’ (e.g. a flat 75% tax). So what generally is the split for a PSA? Well it is very much a sliding scale. For small and medium sized producing reserves the

Exploring Our Potential

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PEPA has around 500 permanent employees with companies in Yemen, the majority of whom are engineers, and there are three types of Yemeni engineers. One type is simply those seconded to companies for training; others are employed; and the last type is the supervisory engineers. ‘profit oil’ (i.e. the sum after the company’s costs are met) it’s usually between 70% and 80% (to the government), but for larger reserves its around 90%. How about the other two main roles of PEPA? The technical and the supervisory? Well, PEPA has around 500 permanent employees with companies in Yemen. Of them, the majority are engineers, and there are three types of Yemeni engineer working in it. One is simply seconded to companies for training with companies – and it is regardless of whether they will stay with the Yemeni oil bodies or if they are later hired to the companies who have seconded them. Another is simply di-

rectly employed into the company. The last type is a supervisory engineer, to ensure regulations are in check. What kind of regulations? Well, HSE for a start (Health, Safety and Environmental). Actually a strong HSE record is a criterion for any investors to be invited to Yemen. In the past there have been complaints from local authorities, for example – in the Hadramout, about hazardous materials. However, certainly now that we’d like to develop offshore production, we would be stringently examining sound HSE track records for offshore operations. And I should say that we de-

Exploring Our Potential

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Our coast guard is quite competent now, and they have received extensive training.

fer to international standards for HSE evaluation, and have our own consultants. I guess there has been a spate of high profile accidents related to offshore oil operations recently. But wouldn’t you say that there are non-geological risks that might plague offshore oil operations in this part of the world? I’m thinking piracy here. Let me answer more generally first. There has never been a single day that oil production has stopped. This is in the face of many risks the country is exposed to ... terrorism, civil war etc. Of course there are challenges, and as you in the media report, oc-

casionally oil installations are targeted. In terms of piracy however, I think we’ll have it covered. Our coast guard is quite competent now, and they have received extensive training. I think I’ve got time for one more question, and then I really must go to a meeting with the Minister for Oil. Oh right. Well, do you think the conference will be a success? ... I definitely think that contracts are going to be signed. I think the greatest testament to the investment potential in Yemen is the enthusiasm to re-invest and expand operations from the oil companies that are already here.

Exploring Our Potential

Oil Overview

According to the Oil & Gas Journal, Yemen had proven crude oil reserves of 3 billion barrels as of January 1, 2010. Yemen’s oil reserves and production are located in 5 main areas: Jannah and Iyad in central Yemen, Ma’ribJawf in the north, and Shabwa and Masila in the south. Recent exploration activity has focused on the area bordering Saudi Arabia, but additions from exploration in the past few years have been relatively small. Despite interest from a large number of companies during an initial licensing round in late 2007, exploration of Yemen’s offshore areas has been harmed by the escalation of Somali piracy in the Gulf of Aden in 2008 and 2009; according to the Yemen Times, the fourth bidding round for 11 offshore oil blocks was postponed in August 2009 in part due to international concerns regarding security in the Gulf of Aden

and higher insurance rates. Sector Organization

Yemen’s national oil company, General Corporation for Oil & Gas/Mineral Resources, is an affiliation of several state-owned subsidiaries including: the Yemen Petroleum Company; the Yemen Refining Company; Petroleum Exploration and Production Authority; Yemen Gas Company, and the General Department of Crude Oil Marketing. The company is responsible for managing industry contracts and relations with operators and partners, as well as the government’s share of crude exports. All branches report to the Ministry of Oil & Minerals, which is responsible for oil policy but contracts with foreign oil companies still require parliamentary approval. The oil sector is open to private company investment on a production-sharing basis.

Oil Overview

Production

In 2008, Yemen’s total oil production was about 300,000 barrels per day (bbl/d). Production has been declining steadily since reaching a peak of 440,000 bbl/d in 2001, and was estimated to fall to around 290,000 bbl/d in 2009 by Yemen’s Ministry of Oil & Minerals. EIA expects oil output to decrease further to 260,000 bbl/d in 2010. Oil production in Yemen is dominated by a number of international oil companies. All production currently comes from tow main sedimentary basins, Marib/ Shabwah and Say’un/Masila, out of a total of 12 basins believed to hold oil reserves. Al Masila’s Block 19 is ranked as the country’s highest producer at approximately 95,000 bbl/d, or 32 percent of the total, according to Yemen’s Ministry of Oil & Minerals. There are 12 producing blocks operated by 11 oil companies and there are 31

blocks under exploration by 16 oil companies. In September 2009, SABA, Yemen’s official news agency, reported that Yemen’s authorities for oil exploration and production plan to explore for oil at 42 locations between 2010 and 2015. Consumption and Exports

Domestic consumption accounted for approximately 150,000 bbl/d in 2008. According to Yemen’s news agency, the government’s share of oil exports in 2009 was 56.8 million bbl/d, which brought in revenues of US$3.5 billion; its share of oil exports in 2008 was 69.4 million bbl/d, with revenues of US$5.9 billion. Exports and revenues were lower in 2009 due to lower production, lower government share of production, and lower prices. China and India are the main export markets for Yemeni crude. In 2008, Asian countries accounted for 76 percent of

Oil Overview

Yemen’s exports and Arab countries for almost 15 percent. Export Pipelines and Terminals

Yemen has an integrated network of pipelines that transport crude oil and natural gas from 3 central production units to export terminals. These include the 270mile Marib-Ras Isa pipeline, which transports oil from the Marib basin to the Ras Isa offshore export terminal on the Red Sea and has a capacity of 300,000 bbl/d. The 90mile Masila-Ash Shahir pipeline runs from Masila to the export terminal at Ash Shahir on the Gulf of Aden and has a capacity of 300,000 bbl/d. The 130-mile Shabwa-Bir Ali pipeline runs from from the Ayad-Shabwa block to the Bir Ali terminal on the Gulf of Aden and has a capacity of 135,000 bbl/d. The total length of pipelines in the country is estimated at 662 miles. A proposed 37-mile oil pipeline

from the Haban oil field to export facilities on the Gulf of Aden was up for bids in January 2010. Haban oil production is expected to increase from 11,000 bbl/d to 32,000 bbl/d by the end of 2010. Downstream

According to the January 2010 Oil and Gas Journal, Yemen has a total crude oil refining capacity of 140,000 bbl/d from two refineries. The 130,000 bbl/d Aden refinery is operated by Aden Refinery Company (ARC) and the 10,000 bbl/d Marib refinery is operated by Yemen Hunt Oil Company. Yemen is reportedly in talks with China’s Sinopec, among other companies, to upgrade the Aden refinery. In November 2009, it was reported that a contract was signed with South Korean company Shinhan for the modernization of the Marib refinery to increase its capacity from 10,000 to 25,000 bbl/d.

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Yemen’s Status in the Oil World

Yemen’s Status in the Oil World By Dr. Ahmed Ali Abdul Elah

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The oil industry in Yemen is the most important industry which has been initiated since the dawn of the Yemeni unity and continued during the nineties until it became the most significant economic source connecting us with outside world.

The oil sector in Yemen in the present and for the foreseeable future is a key source of income to the state. It is also the most important industrial productive sector connecting us with the international market, but it has not been given enough attention and assessment in order to organize it according to a long-term strategic vision. What I mean by enough attention is having, or trying to have, a full vision of what this sector should be like and an economic philosophy. It is also to have a legislative frame for the investment momentum of multinational volumes, production directions and services as well as a mechanism and structure that guarantee consistency and dynamism for leading this sector. The oil industry in Yemen is the most important industry which has been initiated since the dawn of the Yemeni unity and continued during the nineties until it became the most significant economic source connecting us with outside world. It has also become one of the sources of hope for the nation so that we are not regionally excluded in terms of income and welfare. Yemen’s status in the oil world Yemen's geographic location in the region that has a vital position

in the world. It has its own history, Islamic conservative society, population density and its own political reality that is different from its environment. All of these factors force Yemen to practise a unique political and economic role in order to have a status in the new regional order with national characteristics that enable it to play a prominent role in the region which is a challenge. Although Yemen , due to its leadership who has the strategic acumen and vision, has gone far beyond drastic issues like achieving the Yemeni unity, borders’ demarcation, political stability and building a democratic margin, in addition to large expansion in the areas of education, services, investment and the programs of administrative and financial reform as well as the serious attempts to create a safe atmosphere in the neighboring regions, especially the African Horn, etc., there are still economic challenges that necessitate the best use of minds and resources in an organized and planned manner. historic Overview The 1960s and 1970s were the beginning of exploration of oil in Yemen in different areas carried out by many companies starting with

Yemen’s Status in the Oil World

‘‘ Due to historic conditions, Yemen had not received any international attention before the 1980s.

the basin of the Red Sea to the north of Hadramout to the Gulf of Aden. Due to historic conditions, Yemen had not received much international attention, before this time Moreover, the political leadership in the south of Yemen at that time rarely, "opened the door" completely for foreign companies to work in the field of oil, except rarely. Those limited beginnings were useful in such a way that they produced some encouraging results for the existence of hydrocarbon substances in those regions as well as the formation of the first general database and some detailed geological survey information. This phase led to a real continuation of works in the 1980s that resulted in the first discoveries of oil

and gas in the Marib-Shabwah Basin. After Yemeni unity was realized on May 22nd 1990, the oil discoveries accelerated after major oil companies like Shell BP, Chevron, Total, British Gas and others entered Yemen. Yemeni unity thus a great value as it laid the foundation of stability, development and democracy at the same time. Those works in the field of exploration have resulted in a new reality for the oil industry in Yemen,which is cheracterised by: • New oil discoveries • Obtaining significant scientific information and data which led to understanding of the nature of oil geology in some parts of Yemen • Emergence of the state institu-

Yemen’s Status in the Oil World

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Scarcity of information about the region of Shabwah at that time kept those companies from obtaining appropriate geological objectives, and caused them to hastily assess their situation.

tions in this area • Emergence of some local private companies and service offices Because the major companies did not succeed in making large and quick discoveries that befit their expertise and economies, they did not hesitate to withdraw hastily, without sufficient studies for the geological nature of the region of Shabwah where most works were concentrated at that time. Scarcity of information about the region of Shabwah at that time kept companies from obtaining appropriate geological objectives, and caused them to hastily re- assess their situation . Oil was later discovered in some of those regions by

smaller companies. The hasty withtrawal of some major companies coincided with the separatists’ war, which left behind a negative impact that cast a shadow on oil investments and discouraged enthusiasm of the multinational companies. However, Yemen managed, thanks to its leadership, to shortly recover and reproduce stability after elimination of the separation attempt. The oil sector was able to continue and invite new investments when medium and small-sized companies entered Yemen. These companies were able to create actual investment in the area of dis-

Yemen’s Status in the Oil World

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determining the ceiling of production happens abstractedly; that is to say, only the potential data of the production fields at a particular time is considered, with the calculation of any potential reserves as well as non-calculation of new discoveries that have not yet been entered in the process of production

covery in several regions, which led to further discoveries. The production companies in the fields of Al-Masilah, Marib, East Shabwah and Jannah succeeded in developing the oil fields in addition to secondary discoveries which led to increasing production that enabled Yemen to create relatively stable economic conditions based on the oil returns in particular with the increase of oil prices in international markets. Presently, oil is still the first component in the economy of Yemen, where it provides the major share of the state’s exports and returns. Saying that Yemen is considered an oil-exporting state, and gas -exploring in the near future, holds many facts we cannot ignore or.In the same breath , we cannot exaggerate them. Instead, we must put them within their actual historical frame and view the future according to scientific information with some realistic hopefulness. These facts are as follows: • Yemen has secondary importance in relation to its confirmed reserves of oil and gas as well as their production. • The decline of natural production from the main production fields in Marib and Al-Masilah makes working on new discoveries at the top of list of concerns of the oil sector. Emphasis should be put on the fact that this decline is justified if we take into account that these oil fields have been made use of for a long time and have exceeded half of their average age “AlMasilah. On the other hand, we have to

know that determining the ceiling of production happens abstractedly; that is to say, only the potential data of the production fields at a particular time is considered, with the calculation of any potential reserves as well as non-calculation of new discoveries that have not yet been entered in the process of production. Also, the prediction of running out of the oil stock from which production is presently taking place is made on the basis of calculating the reserve that is certain to produce in a time curve, which is evaluated yearly. Furthermore, the state and the World Bank take this into account every year. This process is built on realistic calculations in every oil-producing country. Accordingly, this point was referred to in the President of the Republic’s speech, stressing the importance of paying attention to discovery works to find new resources so as to avoid exhausting the present stock. In other words, the full evaluation of the future of oil is made by two major methods: • Calculation of definite reserves at the present • Calculation of potential resources “the resources are the undiscovered reserves”, not in production sectors but in all sectors that are now under exploration works for oil and other sectors onshore and offshore which constitute the major part of Yemen's reserve potential. We can concisely say that 80% of Yemen’s sedimentary basins are still undiscovered and the potential oil resources of these basins have not yet been estimated. The current

Yemen’s Status in the Oil World

exclusive oil map includes 100 blocks according to the statistics of 2009: • Only 12 production blocks only • 3 undeclared yet blocks where there are new discoveries • 51 open blocks There are new oil fields which have been discovered in some production sectors, but have not been exploited yet, in addition to some recent production fields that have not yet reached their peak in production. The oil and gas discoveries are still confined to limited areas of both basins of Al-Masilah and Marib-Shabwah. Discoveries in other seven other sedimentary fields have not been made yet due to lack of works in

them in addition to the remaining regions of Marib-Shabwah. When the Yemen regions are scheduled as per their promising yield, which are usually categorized according to certain information and scientific odds by adopting a common scientific method, the prospective picture before us shows the following: First: Al-Masilah and MaribShabwah basins: Both basins are important at the present time as they have been proven to contain oil and gas and the main elements of their accumulation. That is, these two basins are fully qualified for new discoveries in the blocks marked on their natural geography. This is proven by geological data information about the spread of the rocks producing

Yemen’s Status in the Oil World

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Discoveries in other seven sedimentary fields have not been made yet due to lack of works in them in addition to the remaining regions of MaribShabwah.

hydrocarbon substances on all the area of the two basins. Existence of these rocks is a key condition for existence of oil. Some new discoveries in a number of blocks have been declared but some other discoveries will be declared during this year. Oil has been recently been discovered in new blocks in the basement rocks, which proves existence of oil in main and sub-layers. Some discoveries, which we call “marginal” at present, will probably be developed in the plans of field development so that they become discoveries of a moderate volume or more. In Shabwah, true oil hunts have not been discovered yet. The whole region is qualified to store various reserves of oil and gas across several blocks. This is a possible opportunity for which international companies are working presently. Moreover, the western strip of Marib region is still not producing. There are true indications for the existence of oil and

gas in it, especially after the commercial discovery in the sector adjacent to this strip. Second: the regions where noncommercial discoveries in both basins of the Red Sea and the Gulf of Aden: These discoveries are considered of the existence of an integrated petrol system in the shallow and deep areas of the sea (the waters of the Red Sea are shallow); that is, these regions are promising and storing potential reserves and need several exploration campaigns. Third: Both Basins of Jaiza’ and South Rab’a Al-Khali: These regions are still virgin due to lack of data. They may, truly, represent a Yemeni Siberia in the future in terms of their vast areas and their remoteness of urban areas and their potential strategic stock. They are in dire need of efficient promotional campaigns to attract major international companies having wide experience and high technical capacities

Yemen’s Status in the Oil World

to encounter the challenges related to the harshness of their geological structure. It is worth-mentioning that major discoveries of oil and gas have been made in the region of Rab’a Al-Khali (the Empty Quarter) in all the countries adjacent and overlooking it (Saudi Arabia, the Gulf, Iraq and Syria). Yemen enjoys having the southern part of this basin within its desert geography extending from the borders of Oman to Al-Rayyan Mountains, and also from its southern borders to the southern boundaries of Al-Rayyan. Furthermore, the basin of Jaiza’ occupies the area extending from

Al-Masilah area and flows towards the south-west direction until its greatest depth reaches the region located under the water of Al-Kamar Gulf; and perhaps this part of the basin has a lot of secrets that have not been explored yet. Fourth: Balhaf Basin, near Shabwah: It is a region that is not studied yet. Fifth: the Aden-Abyan Area: According to the available data and the surface geological works, this area is part of a basin that is similar to the Al-Masilah Basin and the Shabwah-Marib Basin in terms of the sedimentary components and ages of the rocks producing the hydrocarbon substance.

Yemen’s Status in the Oil World

Sixth: The Submerged Region adjacent to Socotra Island: This is a virgin area that has not been focused on yet, except for small-scale interrupted visits on which no real conclusions have been made. On the other hand, Yemen overlooks key strategic sea and land ports. Both regions of the Red Sea and the Gulf of Aden represent a vital vein not only for the crude oil tankers, but they are also intercommercial regions between the world continents. They have been historically so and will remain now and in the future more important due to the increase of the interna-

tional commercial and economic activity. Also, the regions near their shores and islands allow for various industrial and transportation systems. Considering that Yemen represents the lower part of the Arabian peninsula and its natural extension to the south, the western strip extending from the region of the Rab’a Al-Khali to the coastlines will be a practical and easy for the passage of oil and gas lines coming from the south-east the Rab’a AlKhali and other regions to reach the seaports in the south-east costs of Yemen.

Petroleum & Minerals Training Center (PMTC) in Yemen

Petroleum & Minerals Training Center (PMTC) in Yemen The Petroleum and Minerals Training Center in Yemen was established in the capital in 1996 and in the past years especially it gained special importance and relevance for the Oil & Mineral related organization under the direction of Eng. AbdulRahman Abdulla Saber.

By Jihan Anwar National Yemen

PMTC trains members from the petroleum, gas and mineral business, crude oil surveying and refining companies, from the ministry itself and with other associations. The PMTC has more then 118 programs designed to boost the skills and experience of the participants. â&#x20AC;&#x153;Our partners send us their employees that will be trained by us in a course that usually takes place in a ten days sessionâ&#x20AC;? illustrates center Deputy Manager Adel Kaid Ali Hadwan. The learning courses have a wide range of beneficiaries since it consists of both purely technical skills and management supporting courses. The Center has substantially increased the number of programs that concentrate on giving specific new techniques for the labor market to meet the necessities of market and industries.

Also, English and French training classes are offered with Computer Information basics given so as to build up the knowledge of the workers. The teachers chosen are both natives and foreigners. In case of Yemeni English Teachers, they must fulfill a qualification requirement of a minimum of 600 points score in the TOEFL or be native English speakers. Furthermore, the direction cares that only highly experienced technical trainers are hired, having practical experience rather than only theoretical knowledge. The center is very quality oriented, and aims at improving standards at every occasion. The courses profit from a wide range of workers, from the management and leader class to the labor executive position. Included in the Petroleum & Minerals Training Center courses are programs aimed at shaping suc-

Petroleum & Minerals Training Center (PMTC) in Yemen

cessful leadership skills, building essential skills for women and handling business challenges. The class itself is an experience-sharing environment promoted by selecting and opting for a determined number of participants. Discussions, exchange of opinions and a problem solving mentality in every group is highly encouraged. All of the programs are based on the need and requests of associates. Every year organizations utilizing PMTC services outline a ‘Training Needs’ list of programs. After analysis, evaluation and development of these requirements a series of courses is designed based on it. ‘‘To further increase the benefit of the programs we also add courses that in our experience we have seen to be helpful in the past and courses that according to expert analysis of the market are recognized as useful for the future’’ explains Hadwan. One of such important classes will be on the ‘Solar Gas Turbines’ scheduled for November. PMTC features an aid program with PetroSkills and with the APA to which the center offers different packages. The PMTC has a very close partnership with the PTC opened by a petroleum company in Aden to whom it provides teaching programs and assistance and is finalizing the cooperation in the administration of the Salah Petroleum Training Center. In Marib, Al Jawf and Shabwa the institute is developing its work since the petroleum sector is very active in these areas, and the students will receive a diploma in a two year period on engineering assistance to respond to the labor demand in the area and to instruct on safety and environment protection. The Petroleum & Mineral Training Center is careful that the studies allow their partners to be able to compete on an international level. The Center has the priority of keeping up to date to the latest technologies in the oil and mineral sectors with all new features that appear in the market.

Petroleum Pedagogy

Petroleum Pedagogy The Hadramout University of Science & Technology (HUST), located in the coastal city of Mukalla, is the sole academic institution which offers a degree program in petroleum engineering, and other related technical disciplines. The National Yemen interviewed Prof. Salem Awad Ramooda, the dean of the faculty of engineering at HUST, and noted poet, for his insight into the academic and pedagogical perspective on the oil and gas industry in Yemen.

By NY Staff

Thanks for meeting with us, Dr. Ramooda. I was hoping we could first hear a little about the department at HUST. Well, HUST was first opened in 1996, and the department of petroleum engineering, in the faculty of engineering, has been here since the beginning. We have about 100 students enrolled on each year of each departmental programme, there being five engineering departments – petroleum, chemical, electronic, communications, and architectural. How long are the courses?

The degree programme is five years long, and so its a more comprehensive training package which students get. Students are expected to complete relevant work placements as part of their third and fourth year courses – two months each. What’s on the petroleum engineers’ curriculum?

The petroleum engineering course has overview modules, as you’d expect – geology, mathematics, thermodynamics, geophysics, and so on. But it moves onto more specialized modules, for example, drilling technology, oil field equipment, oil well maintenance, exploration analysis, oil / gas production, erosion, decision mathematics, and the use of accounting petro-engineering. And what’s the make-up of the student population?

Naturally we attract a large number of Hadramis (people from the Hadramout region) – I’d say about 60% are Hadrami. Another 30% represent the rest of Yemen, and the remaining 10% are from other countries in the Arab world; Sudan, Egypt, Palestine, Saudi Arabia, Oman etc. So, tell me how the department, faculty even, can flourish? We’d of course hope for more

Petroleum Pedagogy

fruitful and constructive cooperative arrangements with oil and gas companies. But everyone says they want better relations!

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...we should be getting a celebrity amongst our teaching staff soon, as a former oil minister should take up a teaching position here in the near future.

What do you envisage that would actually entail?

Well, at the moment a few companies only offer a very limited number of work placements. We have a hundred students each year, and perhaps a company will only offer five slots. Similarly, professionals in the oil industry could come and offer guest lectures, or tours of oil installations. Some do at the moment, but they’re a minority. There could be some powerful cross-pollination between academia and the industry, in this respect. How else do you think industry links could be fostered?

Well, we should be getting a celebrity amongst our teaching staff soon, as a former oil minister should take up a teaching position here in the near future. At the moment, our academic staff also make good use of their sabbatical leave, many of them visit-

ing other Arab countries, particularly Egypt and Iraq, and also destinations in Asia, particularly Malaysia. Am I right in thinking that this university, HUST, is government run? If so, do you feel funding is adequate?

You are right – it is a governmental university. I think, to properly develop, we’d need at least $1M USD, that is another 100%. But why would businesses and companies consider investing in Mukalla, as opposed to the capital, Sana’a, or even Aden or Ta’iz?

Actually there are some pretty obvious reasons. Firstly, Hadramout as a whole makes up almost a third of the republic, and it’s located far closer to the important producing hydrocarbon blocks and oil-rich basins. Perhaps worthy of note is that I would consider Mukalla one of the safest parts of Yemen, and so, perhaps the most stable place to invest in. It’s also, simply, a pleasant place to be! We have the sea and beaches here.

Petroleum Pedagogy

OK – lets say you got the funding, what would you use it for. I’m sure you’d be able to creatively spend $50M USD, if you were allocated it. How would you justify its expenditure?

Our priorities are mainly structured around developing and advancing our labs, and also procuring example oil field equipment, so that students better understand the processes, and can get experience of their operation before getting employed. Most especially we need some example drilling equipment for demonstrative purposes. What else would you use investment for? Our Information Technology capacity also needs some enhancement. We’d like to not only teach the principles of electronics to students, but also lend them experience from relatively up-to-date, off-the-shelf,

technology. Again, our particular focus is on computer simulations – and that applies to all engineering departments, including petroleum engineering. And how about teaching staff, and other ways to innovate the current learning climate? Well, unfortunately the economic crisis affected us, even down here in Mukalla, and we had to cut nonYemeni staff by 20%. So, any funding increase would also go to recruiting teachers from abroad, and, perhaps more interestingly, we are developing ideas on founding a centre for professional continued learning, so that industry standards can be maintained across Yemen, throughout an oil or gas workers career, and also so that we can, strengthen industry links and generate more opportunities, for both parties.

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Dynamic Equilibriums in Gas Investment

‘‘

“We’re much more conscious of the environment and sustainable development than we are concerned over security threats,” the General Director of the Gas Division at the Ministry of Oil & Minerals said. It was a refreshing point of view, and viewer. By NY Staff

Dynamic Equilibriums in Gas Investment

‘‘

The first memorandum of understanding (MOU) related to gas was signed in 1995 by Total, although the idea was posited a few years earlier by the nowinfamous company, ENRON.

Mrs. Nada Aman leads the Gas Division after a full career in the industry. She started off as a chemical engineer, graduating from Kuwait University’s Petroleum & Engineering Department. However, she has seen a lot of changes during her time. Whilst originally Mrs. Aman ‘learnt the ropes’ as an office manager with Yemen Investment Company (YICOM) in 1991, coordinating with Jenna Hunt Oil Company, she moved to the Gas Division of the Ministry of Oil & Minerals in 1997, and considers this the real start of her career. She became the information and research manager in the Gas Division, and has climbed up the ranks ever since. What is important though is that whilst the petroleum industry is relatively new in Yemen, gas is an even newer phenomenon. The first memorandum of understanding (MOU) related to gas was signed in 1995 by Total, although

the idea was posited a few years earlier by the now-infamous company, ENRON. “Thankfully no forward steps were taken with them,” she said. CHALLENGES

This nascence, in a way, presented tougher challenges to the Gas Division than “mere inexperience”, especially as it started after the oil rise: How can investment in the gas industry (more modest in size and returns than their counterpart) compete as an alternative to the booming investment of the oil industry? How can one maximise the potential income for the country when gas and oil reserves overlap and contracts are already in place with oil companies? These past problems were mitigated, but never fully solved. Nowadays, however, the difficulties are much more intricate, such as how to create long-term arrangements that balance both prices and distribution

Dynamic Equilibriums in Gas Investment

‘‘ if we waited, the project would’ve been continuously delayed for some time to come, and it would have been a mistake to lose one of the biggest shareholders in the world from entering an agreement with us.

between US and Asian markets. This proved to be a challenge when the Yemeni government, almost a decade later in 2004, entered serious negotiations with KOGAS, the South Korean Gas Company, as their first buyer. There were, however, criticisms that Yemen entered these cooperative agreements prematurely. Nada seemed adamant, however, that “if we waited, the project would’ve been continuously delayed for some time to come, and it would have been a mistake to lose one of the biggest shareholders in the world from entering an agreement with us.” Indeed, she went on to say that “the offer was, in fact, extremely good because there was an unprecedented flexibility on offer, that we would be able to re-negotiate the terms of the contract after five years, to ensure a fair rate and arrangement.” This type of arrangement came in particularly useful after the recent economic crisis. Certain part-

ners have buying prices which are linked to the US market, which was obviously struggling at the time. Our balance between US and Asian markets ensures a dynamic equilibrium for our profits, as we can redirect products to different markets to ensure that we maintain our nation income. It is unsurprising, then, that such great shifts in the energy industry unsurprisingly ascend to a political and diplomatic level, and are not simply within the writ of the Gas Division. Gas is an interesting issue, as its effects span upper level international diplomacy, but also make a huge difference to Yemenis, at a local level – even pipelines. MA’BAR PIPELINE

Mrs. Aman said that “there was much optimism for the industry here – everybody is interested.” In particular, she seemed enthusiastic about ‘Safer-Ma’bar pipeline’ which is a new project in its embryonic stages. The pipeline project has recent-

Dynamic Equilibriums in Gas Investment

‘‘

About 1 trillion cubic feet (TCF) of the country’s proven 9.15 TCF has been earmarked for the domestic market. Of that trillion, a majority is expected to go to electricity power generation.

ly been given the green light, and it is expected to be approximately four years away from the completion (one year’s worth of engineering appraisal, and another three years of construction). Ma’bar, it should be noted, is not a coastal city. Consequently, this pipeline isn’t designed to support downstream gas exports, but rather to enable Yemen to meet its energy demands, as supply regularly falls short. About 1 trillion cubic feet (TCF) of the country’s proven 9.15 TCF has been earmarked for the domestic market. Of that trillion, a majority is expected to go to electricity power generation – an ambitious amount. The project became more ambitious during its conception, when it was decided that it would be upgraded to 24” thickness. This inevitably meant that the original sum of $110M USD, which was already agreed upon by the Yemen LNG shareholders ten years ago, needed to be increased. Fortunately, how-

ever, the Ministry of Finance was able to pick up the short fall. FLARING

Another policy the Gas Division is pushing for is to enforce the effective usage of gases which are traditionally flared by oil companies. During the oil production stage, noticeable amounts of unwanted gases are also extracted, simultaneously. These gases are usually handled with in one of two ways; either they are re-injected into the ground (e.g. to maintain geological integrity) or they are ‘flared’, that is burnt off as excess, useless gases – flaring posts are perhaps one of the more noticeable features to an oil production installation. Instead, the Gas Division wants to ensure, as part of future PSAs (Product Sharing Agreements) that there will be guidelines as to handling of flared gases. Particularly such gases could be used for localised power generation efforts.

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ÂŠ YEMEN LNG

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Dynamic Equilibriums in Gas Investment

CONCERNS

Upon asking Mrs. Aman about how she felt security threats impacted upon gas operations, she brushed aside most of these concerns. “We’ve only had small and very occasional trouble, we have ample protection from the defence ministry for our installations. Ten stations have been set up to protect our Balhaf pipeline, and even our tankers have Navy / Coast Guard escorts which assist them until they reach safe international waters.” “We’re much more conscious of the environment and sustainable development than we are concerned over security threats,” she added. The government subsequently set up an ‘environmental affairs’ team and employed the French oceanic biodiversity society CREOCEAN to advise and suggest ways to protect against the marine disruption caused by gas installations. Corals have been protected and threatened species moved. In terms of sustainable development Yemen LNG has guaranteed

$26M USD for the 2008-12 period, and much of this money is designated to improve local education, helping sustain the fishery industry, and for the local health sector. FUTURE “The doors are wide open to investors,” Mrs. Aman seemed delighted to say. “We’re receiving offers from companies in US, European and Asian markets, and some of these offers are for some pretty ambitious projects.” But the optimism was tempered by realism, and Mrs. Aman was well-attuned to the timing of things. The landscape of the gas industry is predicted to change greatly in a few years time “after a more complete evaluation of our reserves and the completion of the Ma’bar pipeline.” Of course, Yemen does not have to wait for its entirety to be appraised for gas reserves. Our knowledge, and priorities, will be on a “block by block basis, to accelerate progress.”

Dynamic Equilibriums in Gas Investment

Yemen LNG: Facts & Figure

Yemen LNG: Facts & Figure As the Yemen’s largest-ever industrial investment (budgeted around US$ 4.5 billion), the decision to launch the Yemen LNG project in August 2005 was an important milestone for both the Government of Yemen and the Yemen LNG shareholders.The location of Yemen is strategically advantageous allowing accessibility to all LNG markets, both in the Asia Pacific basin as well as to expanding markets on either side of the Atlantic. The proven gas reserves are sufficient to produce and export 6.7 million metric tonnes of LNG per annum (mmtpa) for at least the next 20 years to its long-term customers in the North American and South Korean markets and potentially also to new customers in the future. The Yemen LNG chain comprises new and existing upstream gas processing facilities including a 25 km, 20-inch transfer line linking the two gas processing units in the gas fields of block 18 in Marib; a 320km, 38-inch new main pipeline, which will connect the gas processing facilities to the new liquefaction facilities in Balhaf, and a spur line to transport domestic gas to the Ma’bar area in central Yemen.

Yemen LNG: Facts & Figure

Gas Supply Sales Gas Reserves Plant Location Number of Trains Technology

Block 18 (Marib), central Yemen 9.15 TCF proven, 0.7 TCF Probable (1 TCF reserved for domestic market) Balhaf, Yemen (200 km SW of Mukalla, 320 km from Marib fields) 2 APCI C3/MCR (recognised international technology)

Total Capacity

6.7 Mmtpa guaranteed capacity

Sales Contracts

3 long-term contracts to GDF-Suez, Kogas and Total Gas & Power for a total of 6.7 Mtpa

Terminal Jetty Dimension Storage Tank Capacity Production Phase

Balhaf (dedicated) 70,000 - 205,000 m3 ships 2 x 140,000 m3 2009

Graph by National Yemen (Source data: YEMEN LNG)

TCF: Trillion Cubic Feet Mmtpa: Million Metric Tonnes Per Annum

Yemen LNG: Facts & Figure

Total (Project Leader - 39.62%) Total is one of the world’s top three LNG players, with interests in some of the world’s largest liquefaction plants, which together account for approximately 40% of today’s global LNG production capacity (Adgas, Bontang, Qatargas, Qatargas 2, Nigeria LNG, Oman LNG, Snvhit LNG). In addition to the above projects, Total is involved in developing a series of new LNG projects, including Yemen LNG. Downstream in the LNG chain, Total has interests and rights to supply LNG in regasification terminal projects in several markets such as the United States (Sabine Pass), Mexico (Altamira), France (Fos II) and India (Hazira). Participation in terminals is associated with participation in marketing in the corresponding gas markets. The company has also chartered an LNG carrier on a long-term basis; the vessel will be delivered in 2006. Total’s LNG strategy is to consolidate and expand existing LNG positions and to develop new projects. Furthermore, Total aims to fully leverage its gas resources through participation in natural gas and power generation projects. Total has been actively involved in Yemen oilfield developments since 1987 as both a partner and operator.

Hunt (17.22%) Hunt Oil is one of the world’s largest privately held independent oil and gas companies, with a strong domestic and international presence. Hunt’s 1984 oil and gas discovery in Yemen has generated over 1 billion barrels of oil exports to date. The hydrocarbon reserves discovered by Hunt contain sufficient quantities of natural gas to underpin the Yemen LNG project. Some US$2 billion have been invested in drilling wells and developing infrastructure to produce, process and export the reserves. Most of the infrastructure will also be utilised for the LNG project, with only relatively modest investments necessary to produce and deliver the gas for liquefaction.

Yemen Gas Company (YGC)(16.73%) YGC was created in 1993 as General Gas Corporation and re-organised in 1996 as Yemen Gas Company. Its role is to promote gas utilisation in Yemen, thereby contributing to the country’s industrial development and economic growth. Its activities span the entire gas chain, from exploration and production to transportation and marketing. YGC is also responsible for bulk distribution of Liquefied Petroleum Gas (LPG) to meet fastgrowing domestic demand. YGC is fully committed to the successful development of the Yemen LNG project, the largest industrial venture ever undertaken in Yemen.

The General Authority for Social Security & Pensions (GASSP) (5.00%) GASSP, which was established in 1980, is the most significant social security organisation in the Republic of Yemen. It covers civil servants who have been permanent employees of the Government providing ben-

Yemen LNG: Facts & Figure

efits for old-age, death, disability, and work-related injuries to all governmental organisations, public and “mixed” sectors employees. GASSP operates from 22 branches across the Republic employing more than 900 employees. Most of its portfolio investment comprises domestic Treasury-Bills and deposits in US$ at the Central Bank of Yemen with smaller sums invested in real estate, direct investment and loans to beneficiaries.

Korea Gas Corporation (Kogas) (6.00%) Korea Gas Corporation (known as Kogas) is the world’s largest LNG importer. Kogas operates three LNG terminals and a nationwide pipeline network in Korea and will import 2 Mtpa of LNG from Yemen LNG for 20 years. As a partner in Oman LNG and Ras Laffan LNG, Kogas has proved its capability and reliability in the upstream business, and is actively expanding its business in overseas LNG projects using its accumulated expertise in the global LNG industry to pursue its goal of becoming a world-class integrated energy company.

Hyundai Corporation (5.88%) Hyundai, a company incorporated under the laws of Korea and a member of the Hyundai Group of companies, holds 5.88% of Yemen LNG’s shares. Founded in 1976, Hyundai is a leading general trading company and one of Korea’s largest conglomerates with activities in petroleum, petrochemicals, energy and resource development. Hyundai has been active in the exploitation of crude oil and natural gas since its first participation in Yemen’s Marib oil field in 1984 with a 2.45% interest. The company entered the LNG business in the early 1990s with the construction of an LNG carrier and ownership in the Oman and Qatar Ras Laffan LNG projects. Hyundai is now focusing on further expanding its business opportunities across the LNG chain.

SK Corporation (9.55%) SK Corporation participated in Yemen LNG as the leader of Korean consortium comprising SK Corporation, Samwhan Corporation and Korea National Oil Corporation. The Korean consortium also has 24.5% of the exploration and production interests in the Marib fields in Yemen, which came on stream in 1987. SK Corporation is Korea’s largest integrated energy and chemical company. SK is active across the gas chain, from the wellhead to the burner tip. Upstream, it is a partner in the Peru, Oman and Qatar RasGas LNG projects. Downstream, its subsidiary SK Shipping operates six LNG carriers. It is also engaged in domestic city gas distribution and combined cycle power generation through its subsidiaries. Samwhan is one of the leading construction companies in Korea and has been an active player in the Middle East, South East Asia and all other major construction markets around the world. Korea National Oil Corporation is a state-owned company founded to stabilise the energy supply to Korea and a leading exploration and production company in Korea.

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LNG: Exports & Infrastructure

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DNO Yemen AS P.O.Box 16133 Off Damascus St. Sana'a Republic of Yemen Tel: +967-1-428-230 Fax: +967-1-1428-231 www.dno.no

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Reaching new horizons ...

DNO International ASA is a fast track, full-scale exploration and production company. Founded in 1971, DNO was the first Norwegian oil company listed on the stock exchange. By 1998 it had expanded operations to Yemen, and on the turn of the millenium celebrated its first oil discovery here, in Sharyoof. Since then, five additional fields have been brought into production from within a year of their discovery. Today, DNO operates over 70 wells across four hydrocarbon blocks, in East Hadramout.

â&#x20AC;?Yemen is a good example of how we are prepared to be a proactive, sustainable and efficient operator, using the minimum level of resources and taking small steps to build up competence and technology as required.â&#x20AC;?

Decrypting LNG’s Future

By Anatoly Kurmanaev National Yemen

A year ago Yemen joined the ranks of the world’s liquefied natural gas (LNG) exporters, launching a two-train liquefaction terminal at the port of Balhaf. The 6.7mn tonne per annum (tpa) plant is significantly diversifying the country’s industrial base, commercialising a valuable natural resource that until then had been flared, re-injected into oil fields, or simply left in the ground. Moreover, given the strong economies of scale accompanying liquefaction projects, the Yemen LNG (YLNG) terminal could easily be expanded in the future should the economic and geological conditions prove favourable. Most of the expansion debate until now has concentrated on the supply factors, citing Yemen’s limited known reserves base. Proven gas reserves in Yemen have been put at 490bcm at end2009 by the BP Statistical Review. At end-2010, remaining commercial reserves at the Marib-Jawf contract area, which provides all of YLNG’s gas feedstock, are expected to be 283bn cubic metres (bcm) or 10trn cubic feet. Yet assuming full capacity utilisation from 2012, in its present size YLNG will only need 223bcm of reserves over its

lifespan to 2033. Greater exploration activity and/or commercialisation of known associated gas deposits at oil fields clearly provide scope for additional trains at the terminal. The gas supply projections for YLNG need to be counterbalanced with the demand outlook. After all, secure and lucrative markets for Yemeni LNG will encourage gas exploration, providing the reserve backbone for additional trains. In its comprehensive 2007 report on Yemen’s gas industry, the World Bank estimated the total gross revenues from the two-train YLNG terminal at between $27.5bn and $39bn, based on different price assumptions in the project’s two original markets – the US and South Korea. This $11.5bn difference in revenues will largely determine whether the new trains are built or not. Since the YLNG consortium decided to go ahead with the project in 2005, the outlook for global LNG demand has darkened. The biggest game-changer has been the rise of unconventional gas production, which has altered the competitive landscape in the two main LNG markets – the Atlantic Basin comprising the Americas and Europe

Decrypting LNG’s Future

and, to a lesser extent, the Pacific Basin serving Asia.

‘‘ The strong growth in US gas imports, which was expected to absorb cargoes from new LNG producers such as Yemen, Peru and Russia has not materialised.

Shale Shock

In the Atlantic Basin, the welldocumented shale boom in the US had propelled the country to the status of the world’s largest gas producer in 2009. As a result, strong growth in US gas imports, which was expected to absorb cargoes from new LNG producers such as Yemen, Peru and Russia has not materialised. In 2009, the US imported just 12bcm of LNG, well below the 2007 high of 22bcm. Although volumes are expected to recover by 2012-2013 on the back of stronger economic growth and clean energy policies, the stellar upward gas import trajectory envisioned by analysts as late as last year has been severely flat-

tened. The largest US LNG import terminal, the Sabine Pass plant in Louisiana, has recently received approval to export gas, turning upside down all assumptions regarding North American LNG market. Even if the economics of shale drilling prove overoptimistic, gas pipeline projects from Alaska and Canada’s Northwest Territories remain on the table to provide a boost of supplies to the main North American consuming regions. At end-2009, total regasification capacity in the US stood at 117bcm, representing average utilisation rate of just 10%. The world’s largest gas consuming country has clearly become a buyer’s market. LNG prices have consequently fallen. The nine car-

Decrypting LNG’s Future

goes of Yemeni LNG sold so far this year in the US by project partners Total and GDF Suez fetched an average of just $4.50 per million British Thermal Units (mn BTU), according to Bloomberg data. In comparison, Japan, which relies almost exclusively on LNG for its gas needs, has paid an average of US$11.2/mn BTU in 2010. Moreover, the situation is unlikely to improve in the foreseeable future. Most forecasting agencies are predicting that the Henry Hub benchmark price, which determines US LNG prices, will fluctuate in the weak US$4-5/mn BTU range in the coming years. Club Med

LNG demand in Europe, the second branch of the Atlantic Basin market, is also uncertain. Gas demand among LNG consumers such as Spain, Greece, Portugal and the UK remains weak owing to ongoing economic difficulties, while in the stronger northern European markets LNG faces

tough competition from Russian and Norwegian piped gas. Middle Eastern LNG currently sells in Western Europe for $6-8/mn BTU. Early-stage shale drilling in Central Europe and massive new pipelines that Russia is planning to build from its Arctic fields should be a concern for YLNG. The outlook for Yemeni gas on the European market as a whole, however, is not as gloomy as might at first appear. According to Russian investment bank Troika Dialogue, 70% of the new European regasification capacity currently under construction is located in the Mediterranean or the UK, markets that will be relatively little effected by an influx of fresh gas supplies to Europe from the Barents Sea or the Yamal peninsula. YLNG’s proximity to the Suez Canal provides it with a slim competitive advantage over LNG export giant Qatar. Asia Powers On

While the Atlantic LNG mar-

‘‘

The outlook for Yemeni gas on the European market as a whole, however, is not as gloomy as might at first appear.

Decrypting LNG’s Future

lia, where several mega projects fed by subsea gas and coal bed methane (CBM) are due onstream by the middle of the decade. Good business relations between Yemen and South Korean conglomerates should ease the negotiation process and may provide YLNG with a competitive edge. Natural Markets

A major potential new market for YLNG is India, which given its geographical proximity can be considered a natural destination for Yemeni gas. Owing to its slower decentralised decisionmaking process India has lagged behind another rising LNG consumer, China, in building regasification capacity. India’s economic outperformance, however, is creating an ever-greater pressure on the government to provide new sources of gas and LNG import terminals are expected to mushroom from mid-2010s onwards. Finally, an emergence of the Middle East as a large net gas consumer provides an underrated expansion opportunity for YLNG. Despite the region’s massive hy-

ket has been cloaked in uncertainty, Asia remains a bright spot of global LNG demand. Londonbased research house Business Monitor International forecasts LNG consumption in the four main regional importers Japan, South Korea, China and India will rise from 140bcm in 2009 to 187bcm in 2014 and 260bcm by 2020, an 85% increase. Even after subtracting Asian LNG exporters such as Australia and Indonesia, net LNG demand across Asia-Pacific will rise from 76bcm in 2007 to 82bcm in 2014. The presence of Korea Gas (Kogas) in the YLNG consortium provides an opportunity to channel cargoes from any new Yemeni trains into a rapidly expanding market. Under a long-term Gas Sales and Purchase Agreement (GSPA) Kogas already buys 2mn tpa of YLNG’s gas. In mid-2010 this gas was sold at a premium gross price of around $11.45/mn BTU, according to Bloomberg. In vying for supply deals for the new South Korean regasification terminals YLNG would face strong competition from Austra-

‘‘ Good business relations between Yemen and South Korean conglomerates should ease the negotiation process and may provide YLNG with a competitive edge.

Decrypting LNG’s Future

‘‘ Despite the turbulent swings in regional LNG prices and demand, Yemen is well positioned to maximise revenue from its existing trains and to expand its liquefaction capacity.

drocarbon reserves, the runaway gas consumption in the Gulf states is opening a supply gap. Kuwait and the UAE already have floating regasification terminals and unless politically unpalatable gas price increases for the domestic consumers are implemented, a steady rise in LNG import requirements is inevitable. Yemen is perfectly placed to meet this demand. Hybrid Advantage

Overall, despite the turbulent swings in regional LNG prices and demand, Yemen is well positioned to maximise revenue from its existing trains and to expand its liquefaction capacity. First, the country’s location makes it what the International Energy Agency (IEA) calls a ‘hybrid’ LNG producer, able to target both the Atlantic and Pacific markets. Related to this geographical flexibility is the elasticity of the offtake deals held by GDF and Total, which allows them to divert a large share of their combined 4.5mn tpa of contracted Yemeni LNG to higher paying markets. The extra revenue made by exploiting arbitrage in the LNG mar-

kets is split between the Yemeni government and private partners, benefiting both. So far this year, the French firms have been able to reroute US-bound cargoes to India, China, Japan, Spain and Kuwait, netting the government extra returns of $0.3-15mn per cargo. Finally, without underestimating regional complexities it is important to keep in mind the overall global LNG outlook. Despite the sharp fall in the US gas import demand projections, LNG buyers will continue to outnumber LNG sellers. According to the IEA’s 2009 International Gas Market Review, global liquefaction capacity will increase by 50% in 20082013 to 410bcm. In contrast, regasification capacity will rise from 637bcm at end-2008 to 813bcm just by the end of this year. The discrepancy between world’s supply and demand is clear. Strategically located projects backed by leading global LNG traders and buyers such as Yemen LNG are well-positioned to exploit this demand.

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Limestone in Yemen

Limestone in Yemen Limestone deposits are widespread in Yemen, and a number of pure limestone deposits are found in different areas specially, the eastern part of Yemen in Hadramout and Al-Mahrah. The chemical properties and whiteness make them useful in the production of pure calcium carbonate, white cement, iron and steel, glass, paper and agricultural uses. The reserves of pure limestone in Yemen are estimated to be about 3.6 billion cubic meters. Geological setting Limestone deposits are widespread in Yemen, due o widespread sedimentary sequences, ranging in age from Jurassic to Pleistocene. Generally they are distributed in many different geological formations within five geological groups (Amran, Mahrah, Hadramawt, Shihr, and Tihamah), but the most important deposits are found within Amran, Hadramawt and Shihr groups. Limestone deposits are almost exposed on the surface with variable of thickness and degree of purity. Pure limestone in Al-Maha-

rah Pure limestone deposits in AlMaharah zone are exposed on the surface with variable of thickness and degree of purity and located near paved highways. They are white to light grey and beige, and characterized by purity and good whiteness. The average values for the chemical analysis are give 51.20 55.7% CaO, 0.08 - 0.90% SiO2. Physical tests showed that the average values for the density are 2.40 - 2.51 g/cm3, and the average values for the whiteness are 92.2095.06%. These deposits have low silica and alumina contents with high whiteness. The reserves of pure limestone in Al-Maharah are estimated to be about 584 million cubic meters. Pure limestone in Hadramout Pure limestone deposits in Hadramout zone are exposed on the surface with variable of thickness and degree of purity and located near paved highways. They are soft to hard, white to light grey and beige.

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Limestone in Yemen

The average values for the chemical analysis are give 51.20 55.4% CaO, 0.01 - 1.90% SiO2. Physical tests showed that the average values for the density are 2.54 - 2.66 g/cm3, and the average values for the whiteness are 94.8595.20%. These deposits have low silica and alumina contents with high whiteness. The reserves of pure limestone in Hadramout are estimated to be about 155 million cubic meters

Pure limestone in Abyan Pure limestone deposits in Abyan zone are assigned to Jurassic Shuqra formation (Amran group), well bedded grey color, containing minute calcite veinlets and thin interbeds of marly rocks. They are fine grained, compact locally dolomitized, numerous sills and dikes of younger diabase and basalt cut the limestone. The average values for the chemical analysis are give 51.40 â&#x20AC;&#x201C; 54.80% CaO, 0.06 â&#x20AC;&#x201C; 3.49% SiO2. Physical tests showed that the aver-

Limestone in Yemen

age values for the density are 2.67 - 2.72 g/cm3, and the average values for the whiteness are 91.11 94.03%. These deposits have low silica and alumina contents with high whiteness. The reserves of pure limestone in Abyan zone are estimated to be about 983 million cubic meters. Pure limestone in Amran Pure limestone deposits in Sana’a zone are assigned to Jurassic Shuqra formation (Amran group), white to light grey and beige occasionally with vuggs and veins filled with calcite, displayed in beds of 0.3-0.8 meters, which alternate with layers of marls and marly clays. They are located near paved highways. The average values for the chemical analysis are give 49.00 54.60% CaO, 2.60 – 2.81% SiO2. Physical tests showed that the average values for the density are 2.60 - 2.81 g/cm3, and the average values for the whiteness are 81.7084.20%. Analyses of collected samples on the profiles Amran, Khamir, Maswar-Bayt Idakah, AlAshmor, and Al-Harf, indicated high contents of CaO and relatively low in Silica, and alumina contents. The reserves of pure limestone in Amran zone are estimated to be about 220 million cubic meters. Pure limestone in Sana’a Pure limestone deposits in Sana’a zone are assigned to Jurassic Shuqra formation (Amran group), white, light grey, and beige and have granular crystalline structure, several times very fine, sometimes of accumulation

and psoudoolitic. They are often crossed by fine diabases filled with calcite and located near paved highways. The average values for the chemical analysis are give 51.40 - 55.60% CaO, 0.30 – 3.80% SiO2. Physical tests showed that the average values for the density are 2.54 - 2.88 g/cm3, and the av-

Limestone in Yemen

erage values for the whiteness are 86.21- 94.04%. These deposits have low silica and alumina contents with high whiteness. The reserves of pure limestone in Sanaâ&#x20AC;&#x2122;a zone are estimated to be about 520 million cubic meters. Pure limestone in Lahj Pure limestone deposits in Lahj zone are assigned to Jurassic

Shuqra formation (Amran group), dark grey to light grey and beige, massive, thick bedded, fine grained, and containing minute calcite veinlets. They are characterized by purity and good whiteness. The average values for the chemical analysis are give 50.40 55.63% CaO, 0.01 - 4.28% SiO2. Physical tests showed that the average values for the density are 2.30 - 2.21 g/cm3, and the average values for the whiteness are 93.2194.01%. These deposits have low silica and alumina contents with high whiteness. The reserves of pure limestone in Lahj zone are estimated to be about 133 million cubic meters. Pure limestone in Shabwah Pure limestone deposits in Shabwah zone are exposed on the surface with variable of thickness and degree of purity and located near paved highways. They are soft to hard, white to light grey and beige. The average values for the chemical analysis are give 51.80 54.88% CaO, 0.65 - 1.74% SiO2. Physical tests showed that the average values for the density are 2.66 - 2.72 g/cm3, and the average values for the whiteness are 94.1095.00%. These deposits have low silica and alumina contents with high whiteness. The reserves of pure limestone in Lahj zone are estimated to be about 170 million cubic meters.

Mineral Deposits in Yemen

Mineral Deposits in Yemen Rock salt deposits are common in both Mesozoic and Cenozoic rocks. Open pit mining operations date back at least to the Turkish occupation of 1538. Geological setting Rock salt occurs as salt domes within the Sab’atayn Formation (Amran Group) of upper Jurassic age, and within the Salif Formation (Tihamah Group) of Late Tertiary age. The rock salt alternates with gypsum, anhydrite and clay. It is white and grey in color, massive and overlain by bituminous shale’s and gypsum. Al-Hudaidah Salt domes of Miocene age occur along the Red Sea coast from south-east of Al-Hudaidah to AlLuhayyah. The most important deposit is in the As Salif area. The As Salif area The rock salt is situated about 75 km north-west of Al-Hudaidah. The reserve estimates cover an area of 680 000 m2, and with an exploitable depth of 30 m, the mineable

volume is 43 million ton. The overburden rarely exceeds 10 m. If the exploitable depth can be increased to 50 m, the mineable volume will increase to 72 million ton. In addition, the reserve volume will be 115 million ton, if the exploitable depth can be increased to 80 m. Similar deposits are exposed in salt domes along the Red Sea in the Qumah and Al-Luhayyah areas. Shabwah and Marib Salt units up to 200 m in thickness have been reported in oil wells in the Marib–Jawf basin. The rock salt occurs within the Sab’atayn Formation (Amran Group) of upper Jurassic age. The Safir area The rock salt is found about 109 km north of Marib city. The rock salt occurs as salt domes exposed over about 5 km2. The rock salt occurs in coarse-crystal, colourless, transparent to white, occasionally grey or black varieties. The Ayad area The rock salt is situated about 70 km north of Ataq city. In the central part of the salt dome, which is 3.9 x 1.5 km in size, there are numerous salt pits over an area of about one km2, which are exploited by small-scale miners. The rock salt occurs in coarse-crystal (crystals up to 12 cm in size), colourless, transparent, less frequently white, occasionally grey, brown, or black varieties. The Kharwa area The rock salt is situated about 115 km north of Ataq city. The central portion of the dome accommodates salt pits in which rock salt is mined by local miners. Drilling has confirmed salt to a depth of at least 3000 m. Similar occurrences are

Mineral Deposits in Yemen

found exposed in salt domes at the Layadim area where the rock salt is situated about 250 km north of Ataq city, in addition to Al-Jawbah and Sayal Al-Melh occurrences southeast of the Layadim salt dome. The composition is similar to that from the Ayad and Kharwah deposits.

Sana’a as well as in Marib. Huge deposits of gypsum of Lower Eocene age as well as Oligocene age are found in Al-Mahrah, Abyan, Shabwah, and Hadramawt. In Middle-upper Miocene deposits gypsum alternate with salt and clay beds.

Hadramawt

Gypsum in the Jurassic The most important of the Jurassic gypsum occurrences are located to the north-east of Sana’a as well as north-east of Marib.

The Al-Mintaq area The rock salt is situated about 100 km north-west of Al-Mukalla city. The rock salt is coarse-crystalline bearing porphyroblasts up to 4 cm, in size. It is grey to colourless. Gypsum in Yemen Gypsum is found in abundance in Yemen. A large part of the mined gypsum is used as retardant in cement. Gypsum is also mined from a series of small quarries near Sana’a for local production of building plaster. Geological setting Gypsum occurs in the Upper Jurassic in the Shabwah governorate and in the Upper Jurassic and the Lower Cretaceous north-east of

The Sana’a area North-east of Sana’a there are Upper Jurassic deposits in evaporate facies (green clays, gypsum and gypsum layer, 8 m thick), with anhydrite interlayerings. The total estimated reserves of gypsum deposits in Sana’a are about 1.4 million tons. The Al-Kanais area About 40 km north of Marib, over an area exceeding 1 km2, white spongy gypsum occurrences have been identified. Gypsum in the Lower Eocene Huge Lower Eocene gypsum

Mineral Deposits in Yemen

deposits are found in Hadramawt, Abyan, Shabwah and Al-Mahrah governorates. The Aqabat Ashash area The gypsum deposits are situated about 140 km north-east of Sayun city and about 450 km northeast of Al Mukalla city. Over an area exceeding 500 km2, whitebeige gypsum deposits have been identified. The average thickness is 90 m, and the total reserves of the gypsum deposit at Aqabat Ashash are about 4.5 billion m3. The Rudhum area The gypsum deposit is located about 5 km north of Rudhum town in Shabwah, covering an area of several kilometres. It is characterised by sheet, lenticular bodies with fibrous texture varying from white over grey to colourless. The thickness of the gypsum ranges from 40 to 100 m. The gypsum in Rudhum occurs as massive gypsum, as crystals and as transparent cleavable masses. It also occurs as silky and fibrous gypsum, in which case it is commonly called satin spar. A very fine grained white or lightly-tinted variety of gypsum (alabast), is also found in Rudhum. The gypsum raw

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material contains 62–97% gypsum with 1.9–26% anhydrite. The estimated reserves are about 11 million tons. The Ghabar area The gypsum and anhydrite occurrence is located about 72 km south-west of Al Mukalla city. The occurrence consists of white-grey gypsum and anhydrite. Covering large areas, the exposure shows on effective thickness of about 40 m. The raw material contains 76.3% CaSO4. The quantity of raw material is estimated to be about 40 million m3. Gypsum in the Oligocene The Oligocene gypsum deposits are found in Abyan and Hadramawt governorates. Al-Mahfad area Gypsum deposits are located about 5 km south-east of the town Al-Mahfad in Abyan. The upper bed, composed essentially of gypsum, has been explored. The gypsum quality is high, which makes it suitable for production of binding material in pharmaceuticals and as a flux in metallurgy. The estimated reserves are about 7.7 million tons.

Mineral Deposits in Yemen

The Ghayl Ba Wazir area Gypsum deposits are located north-east of the city Al Mukallah. The gypsum is accumulated within flat-lying sedimentary series over 50 km. A 1.6–26.3 m thick band of gypsum and anhydrite, comprising productive beds, whose thickness varies from 4.6 to 17 m, was revealed in the area of the deposit. The content of gypsum is 84–98%. The estimated reserves are about 7.6 million tons. Gypsum in the Miocene The Miocene gypsum deposits are found along the Red Sea coast. The As Salif area The gypsum-containing rock is situated about 75 km north-west of Al-Hudaidah. The gypsum layers occur together with clays and gypsum-bearing sandy marls. This complex is closely related to the underlying salt deposit. In the highest areas (maximum 35 m) the gypsum complex occurs at the surface, while eastwards it sinks below the Red Sea level. Zeolite in Yemen Natural zeolite of good quality has been found in several areas of Yemen. Geological setting Natural zeolite occurs in altered volcanic tuffs. Parts of Yemen have experienced violent and long-last-

ing volcanic activity which has covered large areas (>60,000 km2) with volcanic ashes. These fields provide excellent targets for zeolite exploration and exploitation. Zeolitic tuff deposits are found in three governorates: Ta’iz, Ibb and Dhamar, and they appear to be holding interesting resources. The deposits are characterized by white, grey, green and yellowish colours with fine-grained textures. Pumice and perlite fragments are often present within the zeolitic tuffs. The zeolite was presumably formed by hydrothermal alteration of volcanic glass in the tuffaceous rocks. Zeolite in Ta’iz The natural zeolite deposits in the Ta’iz governorate are found mainly in two areas (Al-Adnah and Al-Ahyuq). The zeolite minerals occur in volcanic tuffs with purities ranging from 58 to 100% zeolite. The different kinds of natural zeolite minerals are clinoptilolite, heulandite and mordinite with rare stilbite. The Al-Adnah area The zeolitic tuff is situated about 8 km east of Ta’iz city. In this area there is an accumulation of white, green, yellowish tuff, partly friable towards the surface. The zeolitic tuff occurs in decimeter thick layers dipping to the northwest. The Al-Ahyuq area A high-quality zeolite mineral deposit is located about 90 km south-west of Ta’iz city. The zeolite minerals are found in Tertiary volcanic tuffs (Yemen Trap Series). In large areas, a tuffaceous complex is found with beds from 12 to 90 m thick. They are white-yellowish, grey or greenyellowish in color. The zeolite contents in the volcanic tuffs range from 68 to 100%. The different kinds of natural zeolite minerals are clinoptilolite, heulandites and mordinite with rare stilbite and laomonotite. The total reserves of zeolitic tuff are 86 million m3.

Mineral Deposits in Yemen

Zeolite in Ibb The natural zeolite deposits in the Ibb governorate are found mainly in Al-Qa’idah area. The zeolite content of these tuffaceous rocks range from 58 to 97%. They are mostly composed of clinoptilolite and heulandite. In some area the zeolites (natrolite and stilbite) are found as radial crystals within cracks and voids within agglomerates.

Zeolite in Dhamar The natural zeolite deposits in Dhamar governorate are found mainly in the Maryah area. The zeolite minerals occur in volcanic tuffs with purity ranging from 68 to 72% zeolites. The different kinds of natural zeolite minerals are clinoptilolite, heulandite and mordinite with rarely stilbite and laomonotite.

The Al-Qa’idah area The zeolitic tuff is situated about 5 to 12 km west of the locality of Al-Qa’idah. It is a stratiform deposit of white-grey to light green 25–30 m thick zeolitic tuff. In this area the zeolitic tuffs are covered by red tuffs or rhyolite. Zeolitic tuff occurs east of Al- Qa’idah, but with small thickness only.

The Maryah area The zeolitic tuff is situated about 16 km west of Dhamar city. The hills of zeolitic tuffs and ashes are of a light yellow colour and are covered by rhyolites and ignimbrites. The zeolitic tuff and ash contain fragments of pumice. The reserves of zeolitic tuffs are estimated to be about 9 million m3.

Mineral Deposits in Yemen

Celestine in Yemen Significant concentrations of celestine, montmorilionite and attapulgite minerals in the eastern parts of Yemen are considered to be of economic interest. Geological setting Celestine is mainly found in shales of Tertiary age, where it is believed to have precipitated very near the shoreline, probably in lagoons. Originally, Celestine formed either the skeletons of radiolarians as Collospaera and Podactinelia or it appears as Sr2+ in aragonite crystal lattice. During diagenesis, radially fibrous rosettes were formed reaching up to 30 cm. In nodular limestone of the Umm Ar Radumah formation, fossils are preserved by celestine. Celestine occurrences The celestine occurrences located on the Hadramawt plateau and situated about 70 km north of the city of Mukalla, occupy a surface of about 200 km2. Celestine crystals are very pure and occur scattered in clay beds composed of montmorillonite-attapulgite. Celestine-bearing beds vary in thickness between 1 and 8 metres, generally they contain less than 1% celestine. Locally grades of 5% celestine are seen. Montmorillonite and attapulgite occurrences The montmorilionite-attpulgite deposits are located on the Hadramawt plateau and situated about 70 km north of the city of Mukalla. The deposit occupies a surface of about 15,000 km2. The deposit is situated at the top of the Jiza formation consisting of calcareous shales. The effective thickness reaches 1.2 m. The colours of the montmorillonite-attapulgite range from pure white to clear grey or yellowish. Physical properties Laboratory tests have been car-

ried out on different samples (sample weight 2 kg) in order to measure the physical properties. The viscosity of aqueous emulsions is within the range which is suitable for drilling-mud. The capacity for absorbing oil has shown very good results (67.90–90.90%), with moisture ranges from 2.70% to 10.40% and residue on 200 mesh between 1.40– 8.40%. Mud of three different concentration ranges between 3.5 and 8 g/100 ml has given the following properties: According to the montmorillonite-attapulgite contents it can be regarded as bentonite. The deposit has the same properties as fuller’s earth, foundry clay and rinsing clay. Besides, it can be used for the following applications: • Preparation of drilling mud • Carriers and absorption material

• Filter material • In paper production.

Scoria in Yemen Most of the scoria deposits in Yemen are characterised by high porosity, low, specific gravity and great strength According to its chemical composition, the scoria in Yemen is analogous to the volcanic rock, used by the construction industry as active mineral additives in Portlandpozzolan cement production. As to its physical and mechanical properties, the scoria meets the requirements of the industry for aggregates for lightweight construction concretes. Geological setting Strombolian-type explosions have formed numerous scoria pyroclastic cones within the basaltic lava in the Quaternary volcanics. The Quaternary volcanic activity occurred in discrete volcanic fields all over Yemen. The scoria deposits are found in five volcanic fields: Sana’aAmran, Dhamar-Rada’, Balhaf-Bir

Mineral Deposits in Yemen

Ali, Shuqrah, and Marib-Sirwah.

Balhaf-Bir Ali volcanic field

Sana’a-Amran volcanic field The Sana’a-Amran scoria deposits are situated about 11 km north-west of Sana’a city and extend east to the Rada’ town for 70 km, covering an idespread area of about 800 km2. The deposits are composed of black, red-brown with violet hue, loose, porous, and lightweight scoria. The reserves of the Sana’a-Amran scoria deposits are estimated to be about 411 million m3.

The Balhaf-Bir Ali scoria deposits are situated about 136 km south-west of Al-Mukalla city. A layer of loose, porous, light scoria builds up three individual hills up to 29 m high and 200 to 500 wide. The thickness of loose slag amounts to 32 m, massive compact cemented scoria occurring below it. The scoria deposit reserves amount to 867000 m3. 18 cones composed of scoria with similar composition are known within Balhaf-Bir Ali.

Dhamar-Rada’ volcanic field The Dhamar-Rada’ scoria deposits are located about 20 km east of Dhamar city and extend east to the Rada’ town for 50 km, covering a widespread area of about 1300 km2. The scoria cones in this field are 13–174 m high and less than 1 km in basal diameter rising to some 200 m above ground level. The scoria is vesicular, fine- to coarsegrained fragments, reddish or black in colour and lightweight. The water absorption capacity ranges from 30 to 38%. The compressive strength values range from 50.20 to 54.60 kg/cm2. The total reserves of the scoria deposits are estimated to be about 495 million m3.

Shuqrah volcanic field The Shuqrah scoria deposits are situated about 130 km north-east of Aden city. Several volcanic cones are known and one of them has been prospected. The Shuqrah scoria deposit forms a hill with a relative height of 90–95 m. The hill has morphology typical for volcanoes with a partly truncated cone, opening in southwestern direction. Geological studies have been conducted in the 0.3 km2 large area. The scoria deposit is composed of redbrown with violet hue, loose, porous, lightweight volcanic slag, with rare inclusions of fragments of caked slag from 10 to 15 cm in size. The density values of the scoria range from 650 to 1000 kg/m3. The

Mineral Deposits in Yemen

Marib-Sirwah volcanic field The Marib-Sirwah scoria deposit is situated about 173 km north-east of Sana’a city. It is composed of about 100 scoria cones and basaltic lava flows. The scoria cones in this field are 19–170 m high, with basal diameters from 110 to 1400 m. These deposits are reddish, sometimes grey, with lapilli and rare, small volcanic bombs. The water absorption capacity ranges from 28 to 35%. However, the compressive strength values range from 34.40 to 35.60 Mega Pascal. The total reserves of the scoria deposits in Marib-Sirwah are estimated to be about 925 million m3.

Perlite and pumice in Yemen Perlite and pumice deposits are common in the Cenozoic volcanic of Yemen. The porosity and low density of these rocks make them useful in the production of lightweight concrete blocks. They are widespread in various areas, among others Dhamar, Ta’iz and Ibb. Geological setting Volcanic glass associated with rhyolite and volcanic tuff is found as massive, columnar beds and dykes or as sills within the Yemen volcanic rocks from the Tertiary and Quaternary periods (Yemen Volcanic Group). Perlitic rocks are found as flows with thicknesses ranging from a few to tens of metres; they are commonly characterized by vitrophyric structures and compact and perlitic textures. The flows are frequently found in the entire region. Pumice shows as thin beds within volcanic ash beds (pumicite) or as blocks mixed with ash. Perlite

Rapid cooling of acid fluid lavas at the surface resulted in some stratiform deposits of volcanic glass (perlite) in the Dhamar, Ibb and Ta’iz areas; they show as flows with thicknesses ranging from a few to tens of metres. Volcanic glasses, the chemical composition of which corresponds to rhyolite, are black or deep green-grey in colour and as a rule contain feldspar phenocrysts 2–6 mm in size. They crop out as a kind of dome-shaped extrusive bodies. The jointing of the rock is mostly prismatic; thinner layers of the rock are disintegrated to small fragments. Domeshaped volcanic bodies, usually groups of bodies, create ridges up to several kilometres long and up to 2 km wide. Flows of volcanic glass in their vicinity reach thicknesses of tens of metres. Layers of ignimbrites usually reach thicknesses from 0.5 m up to 1 m, rarely more than 2 m. The degree of expansion ability must be greater than 4. The expansion ability ratios express the ratio of the sample volume after expansion to the sample volume before expansion. The poor expansion ability of the samples studied is likely to result from the low content of the gas phase in the moment of creation of the pyroplastic state of the acidic melt at a temperature of 1050°C.

compressive strength values range from 6 to 39 kg/cm2. The total reserves of the Shuqrah deposit estimated to be about 7.6 million m3.

Mineral Deposits in Yemen

The Aanis area The perlite deposit is situated about 45 km north-west of Dhamar city. Between Dhuran and Bayt AlUmaisy there is a 2500 m high plateau formed of massive perlite, sometimes as 10–100 m thick columns. The deposit is 2 km long and 1 km wide and is found at the surface, without being covered by any rock types. Petrographically and mineralogically, the rocks are formed of perlite with vitrophyric structures and compact, perlitic textures with perlitic separations. Within the rock mass some flow lines can be noticed, sometimes interrupted by small spherulites; small amounts of feldspar and very rarely pyroxene also appear. The reserves of perlite are estimated to be about 36 million m3. The Al-Waze’yaah area The perlite deposit is situated about 65 km south-west of Ta’iz city. The perlite occurs as medium plateaus, sometimes columnar, with thicknesses ranging from 17 to 76 m. The deposit covers 339 m2 and is found at the surface, without being covered by any rock types. Petrographically, the rocks are formed of perlite with vitrophyric structures, and compact and perlitic textures with perlitic separations. Within the rock mass some flow lines can be noticed, sometimes interrupted by small spherulites; small amounts of feldspar and very rarely pyroxene also appear. The reserves of perlite are estimated to be about 13 million m3. The Am-Shat area The perlite deposit is situated about 300 km north-west of Aden city. During field work, acid volcanic glasses were discovered as one of the products of acidic volcanism of the Ad Dali series. They were tentatively sampled and analysed as potential resources of ‘expanded perlite’. © MOM

Pumice

Mineral Deposits in Yemen

Extensive deposits of pale-grey pumice and pumicite occur on the plains east of Dhamar. They are mined from pits by using front-end loaders. The Al-Lisi area The pumice deposits are situated about 8 km east of Ta’iz city. Between the village Waraka and the volcano Jabal Lisi and between Garasha and Jabal Sibil a 2 × 4 km area has been identified which exhibits a layer of pumice and fragments of pumice with thicknesses of 2–10 m and which is covered by a thin layer of soil. Pumice deposits are also found near Al-Lisi in the Samah area. Between Samhe and Al-Ghula at about 2.5 km south of the Dhamar-Rida road, a 6 × 0.4 km area exhibits stratiform deposits of volcanic ash, pumice and lapilli of Quaternary age. The deposits are 2–4 m thick and covered by a thin layer of soil. The total reserve of pumice is estimated at 1 billion m3. Magnesite in Yemen Yemen hosts large and very pure magnesite deposits of Precambrian age. Compositionally the magnesite is comparable to magnesite deposits exploited in other countries, and the Yemeni magnesite occurrences are thus believed to have a good potential for future exploitation. Geological setting The most promising area is the Precambrian Al-Thaneya belt occurring in central Yemen. The belt is composed mainly of metamorphosed magnesite-rich carbonate rocks, which are interpreted to represent carbonate platform deposits. The belt is subdivided into six stratigraphic units:

Unit-A: Massive magnesite rocks Unit-B: Crystalline green-schist Unit-C: Massive magnesite rocks Unit-D: Thick bedded magnesitecarbonate rocks Unit-E: Thin bedded carbonate-

schist rocks Unit-F: Thick bedded magnesitecarbonate rocks.

The main productive layers of magnesite mineral are units A and C. These units are composed of coarse, perfect, euhedral, subhedral and sometimes mega crystals of magnesite. The magnesite rocks are white, off-white, red, yellow, black and grey in colour. The magnesite beds range in thickness from 20 to 40 m. The lower limit of the metamorphic carbonate sequence is not exposed, but buried under recent sand dunes. Potential occurrences of Magnesite The presence of magnesite was not realized until fairly recently. The occurrences were previously quarried for marble until it was realised that they contained high amounts of magnesite. Although no mining is taking place, the potential seems promising. The Al-Thaneya region includes two major belts trending N–S. The belts are from south to north: The Fariedah belt The belt consists of three small anticlinal mountains surrounded by sand dunes. The southern Fariedah is 0.5 km long, 200 m wide, and 30–40 m high. The middle Fariedah is more than 1 km long, 250–300 wide, and 60–80 high. The northern Fariedah is about 1 km long, 300– 400 m wide and 90–100 m high. The Al-Thaneya belt Al-Thaneya belt is 13 km long, 300–1300 m wide and 90–135 m high. Important, thick, massive and highly pure magnesite units (Units A and C) are exposed in the lower and middle parts. These units are composed mainly of white, very large crystals of very pure magnesite. Their unit thickness ranges from 20–40m.

Yemenizing Industries

Yemenizing Industries Mr. Mohamed Yahya Al-Mutawakel Director General of Yemenization Ministry of Oil & Minerals

The Ministry of Oil & Minerals first institutionalised the concept of ‘Yemenization’ in 1996, which requires that oil companies hire and develop Yemeni nationals. In 2006, the Ministry set the target for all companies at 90% There are some obvious developmental and economic advantages for Yemen with such a program, but the National Yemen spoke to Mr. Al-Mutawakel, Director General of Yemenization, to flesh out our skeletal understanding, and to provide shape and colour to our picture of the energy industry in Yemen. © NATIONAL YEMEN

Graph by National Yemen (Source data: MOM)

Yemenizing Industries

Thanks for meeting us, Mr. Almutawakel. We know you’re a busy man and so we’ll cut right to the point. In your view, what is the purpose of the Yemenization program? Essentially it’s about the empowerment of Yemenis. We want to cultivate a skilled labour force of Yemenis that interacts with international companies and, indeed, becomes serious competition for its global counterparts. But Yemen, relatively speaking, is quite new to the oil industry. When did Yemenization actually materialise as a program? Well, the idea of, and desire for, Yemenization has been with us since oil companies first started operations here. However it was a

perhaps a sluggish start since we had to learn it from scratch. In the beginning, we couldn’t offer many skilled cadres to the companies since we didn’t have so many available, especially with respect to skilled technical positions. With the exception, I should add, of welders – we had experienced pipeline welders who had worked in Saudi Arabia beforehand, and Yemenis were notably the best workers in the region. So for the first ten years we only had a modest footprint of skilled people within the oil companies, except for non-technical positions and semi-skilled labourers. So when did Yemenization really take off? I’d say by around 2000 or 2001

Yemenizing Industries

by which time we’d established a solid base of skilled professionals, which is when Yemenization as an operational government program really started. What happened at this time? Well, the ministry became more clear on its objectives with respect to Yemenization and more ambitious in its expectation of the oil companies. It began to develop a set of rules and regulations which spelled out the requirements Yemenization sought of such companies. Then, a few years later, in 2006 the Ministry set a target for all oil companies to achieve, namely 90% Yemenization of skilled positions within the oil and gas companies. At first, everyone seemed cynical about this target, particularly the companies, claiming it was unrealistic. But the Ministry leadership was adamant to achieveabout 90% Yemenization, and was determined to enforce it. It was, unfortunately, pushed in some cases, a minority of cases, to take drastic measures against certain parties. And so, it was the first time the energy industry in Yemen bared its teeth. And after 2006? Well the first few years were an uphill battle – we were trying to change the mindsets towards Yemenization in oil companies. Some acquiesced, but it really was only lip-service. So how far off your targets do you stand today? Well ... we’re not quite there yet. Some companies are already at

90%, a few have even surpassed the 90% mark. A few others, however, are still a way from our Yemenization target. Nevertheless, I’m glad to report that as of the third quarter of 2010, in aggregate terms, ninety percent of the total skilled employees within oil production companies are now Yemenis. For exploration companies, the number is a bit lower, and for Yemen LNG Company, which has only been in production for about a year, we are pushing to achieve 90% within 2-3 years. So, with every passing day, we are moving towards our objective. But 90% is a commendable figure, surely. What more work is there to do? Well it’s no longer just an issue of numbers. We want to shift our focus from quantity to quality. Try and picture, instead, the hierarchical pyramid of employment, with senior figures at the top, descending through middle managers, and then the junior employees etc. When we say ninety percent are Yemeni, it’s really the middle and bottom portions of the pyramid. We now want to focus on ‘yemenizing’ those leadership and senior positions. That’s logical, but Yemen has only properly been exposed to the energy industry very recently. Surely you haven’t penetrated those upper few percentiles of positions because Yemenis just don’t yet have the twenty years of industry experience that you would expect a CEO to have. Surely it’s just a matter of time? Indeed, it is a matter of time. It

Yemenizing Industries

is, however, also a matter of penetrating the most difficult part of oil companies, their top layers. In order to do this we need to “get our foot in the door”. At any rate, at this point in time, we’re not looking for CEOs, we’re still talking about managers, here – especially managers in technical disciplines. There are qualified people out there, and we feel that even a few small victories in this area will propel the necessary momentum to change this.

Hmmm ... but from the converse perspective, isn’t this, inherently, just as much an anti-expat program as it is pro-Yemeni? Not at all. We have a policy and an interest to keep some expats around. Firstly they provide industry expertise and international experience. Secondly, they also provide a necessary conduit for Yemenis to interact with, and learn from, the outside world. And so, we are keen to always have an expat presence within companies, even after operations have been handed over to the government. As is the case with Safer, our first national oil company, which maintains about 80 expats representing 7% of its skilled workforce. I can imagine that there was some resistance to Yemenization, at least initially. It’s obviously not in our interest to repel investment-we want to attract companies to Yemen. But we have a responsibility, and we should be proactive in developing Yemeni workforces in a realistic

Yemenizing Industries

framework, with ambitious, but achievable targets. So how responsive were these companies? Well, the newer companies were intrinsically easier to deal with than the older ones. Old companies - let’s say ones with more than ten years experience in the country - were already set in their ways and so showed more resistance than the newer ones. So how do you enforce Yemenization? Generally we do it by being persistent and continuously engaged with the companies. And if a company doesn’t cooper-

ate? Well, if it came to it, we could deny work permits to expats who are taking positions for which there are ample qualified Yemenis available and ready to fill. So there are ways for us to get the attention of companies. I’m sure there is also as much cooperation as there was resistance, if not more? Yes, quite a few companies were very cooperative. OMV, for example, was extremely responsive and they have showed great initiative. For example, from the beginning, they assigned a Yemeni HR manager, which at that time was a first. And, by the way, having a Yemeni HR manager makes Yemeni-

Yemenizing Industries

zation a whole lot easier. A Yemeni will know the strengths and weaknesses of the national workforce and the labour market. Effectively, they would short cut a lot of work, in this respect. In the near future, we will ask all companies to have Yemeni HR and Finance Managers as well. Any other success stories? Certainly. Jannah Hunt, whose operator is the pioneer oil company in Yemen, with more than 28 years here, reached the 90% ratio before the government even officially announced the Yemenization targets. Also, Nexen, Dove and DNO are approaching 90% Yemenization.

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...we would like to see continuous empowerment of their Yemeni staff, especially at the management level...

What about companies like Canadian Nexen who have trained a lot of Yemenis who now work in other oil companies? Well, part of doing a good job is in retaining your people. I’m keen that companies invest in (and thus keep) people. Nexen, which is one of the highest paying companies in Yemen, is in the spotlight at the moment, because their PSA will expire in about a year, unless the government decides to extend their PSA. And tho ugh we have seen many positive changes in the company recently, we would like to see continuous empowerment of their Yemeni staff, especially at the management level, well before the end of the PSA, and so there is still a lot of work, for both parties, for this transition. And how did you overcome the initial general resistance to Yemenization? People were used to ‘business

as usual’, and getting permits, visas when they wanted, on their terms. So when Yemenization began, we sent a clear message out that we mean business. The only resistance, really, is getting people to adapt to a new business environment. And the argument that I always communicate is that Yemenization is in everyone’s interest. Quite simply, Yemenization means lower labour costs, which by default translate into bigger profit margins for both the government and the companies. So, you see our interests are actually very much aligned. It’s just that sometimes this truth doesn’t seem so obvious. Surely that only applies for a longer term vision? Absolutely not. Right from the outset, I’d expect that Yemenizing a small number of expats, say five or six, would save the average company $1-2M a year. So you can imagine the magnitude of the savings companies can achieve when they have Yemenized a large number of expats every year, that immediate profit gain will be many times larger. Consider the fact that typical G&A (General & Administrative) costs for most oil and gas companies constitute about 30% of their overall budgets. Well, what would you say to the claim that Yemenis lack the experience and skills necessary for these leadership and technical positions? Surely you can see that that is a ‘Chicken & Egg’ problem. Companies want people with experience, but they don’t really offer the

Yemenizing Industries

chance for people to attain this experience in the first place. Yemenization breaks this cycle.

‘‘ ...imagine the magnitude of the savings companies can achieve when they have Yemenized a large number of expats every year, that immediate profit gain will be many times larger.

So give me an example, in practical terms, of how Yemenization solves the ‘chicken & egg’ conundrum. OK, one of the challenges we face is that companies are often far too unrealistic, unnecessarily so, in their recruitment of Yemeni candidates. Let’s take a recent post advertised for ‘accounting specialist’ here. The advert read that the applicant was required to have 15 years experience in this particular field. I later showed the advert to the GM of this company, who was unaware of the recruitment criterion. He shook his head, and said “you wouldn’t even be able to find someone who meets these requirements in my country, let alone Yemen”. Subsequently the recruitment advert reduced its requirements to five years experience, and of course the company received multiple applications from competent and aspiring Yemenis. You see, the biggest barrier to Yemenis from getting jobs is not their professional capability, but rather the prevailing business mindset. I’m sure that companies find loopholes in Yemenization, as well as solutions for it. I assume you’ve noticed a few ... Of course, oil companies have a good sense of business acumen, and so are creative in ‘playing the game’. Generally we award a five year work permit for a particular expat in a particular post, after that, that’s it. However, companies will

often introduce a new expat, in a different role, a year or so below the senior expat’s permit is due to expire. Of course, the newer expat is ushered in to take that position. Surely that’s quite suspect? Of course. Some of these expats, as we discovered, are recent graduates with very little, if any experience. And their companies will sometimes request work permits under the premise that they are ‘experts’. They, of course, are trained whilst they are out here in the subjects that they are supposed to be experts in – ironically, sometimes they’re even trained by Yemenis. Then of course, when they take over a management position, and are promoted above the Yemeni(s) that trained them. I guess that would be comical if it wasn’t so serious. Indeed. Another approach is that an expat will cross posts for a couple of years, and can renew his permit that way. But surely there are legitimate reasons for crossing posts in such a fashion too. It’s quite usual for this to happen in business, no? But sometimes the move is drastic and unjustified, and there are often Yemenis who are qualified for the job. I guess it is simple human nature, but there’s nepotism and favouritism, and it’s not on. However isn’t it detrimental to get rid of expats who have built a solid experience in and of Yemen? I would say this – we get feedback from Yemeni professionals

Yemenizing Industries

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Perhaps I shouldn’t mention this just yet, but OMV, Calvalley and Korean National Oil Company have all recently promised to consider introducing a scholarship program.

working both in Sana’a and in the field about the expat professionals. We get mixed feedback – sometimes it’s excellent. There are expats out there who are making a real difference for Yemenis – they’re properly training and mentoring, they’re building their skills and their confidence. Personally, I wouldn’t mind keeping these expats for a longer period of time, and I don’t think my superiors would either. But, for those others who are less enthusiastic about developing Yemenis, it’s a different story. So what are the future plans of Yemenization, if you’re refocusing on the top two percentile of employment positions? Well unfortunately, the numbers game is still afoot; we’re just developing new plans and ideas, including the idea for a world-class petroleum training institute, to be funded jointly by the oil and gas industry. This is something all companies operating in Yemen can benefit from greatly. Also, we want to expand on the success of the existing scholarship programs instituted

by three companies, namely Nexen, which was the first to do so, Yemen LNG Company, and Total. These companies have made a huge impact through their wonderful programs, and I hope the other companies in the industry will follow suit. Perhaps I shouldn’t mention this just yet, but OMV, Calvalley and Korean National Oil Company have all recently promised to consider introducing a scholarship program. Additionally, on the basis of social corporate responsibility, I would encourage oil service companies to consider similar initiatives, which could so much good for Yemen and its people. I’m sure you have a more ambitious vision than simply securing scholarships? Well, now that we’ve secured jobs for Yemenis in Yemen, we want to ensure Yemenis are travelling abroad, gaining experience and expanding their horizons. They will have an extremely positive effect, directly and indirectly, when they return, on the industry in Yemen, our national economy, and even on

Yemenizing Industries

society, particularly on their families and their peers. So how are you promoting this? We’re incentivizing this; when we consider Yemenization plans of companies, we count Yemenis who are working with their international company abroad as if they were working in Yemen. It’s favourable for companies and for us as well. And these Yemeni professionals, who will have gained vast industry experience abroad, return and make a huge impact. It’s these people who could be the next CEOs of Ye-

meni oil and gas companies. So you see Yemenization as having a positive influence beyond the oil and gas industry here? Absolutely. Yemenization ensures that the country develops a highly skilled and experienced workforce. We are professionalizing our young nationals to international standards, and nurturing future captains of industry So what I see is ... we are cultivating a resource which in my view is so much more valuable and certainly more sustainable than the natural resource they are producing.

Yemenizing Industries

OMV Yemen GmbH: Pioneer in Yemenization

OMV Yemen GmbH: Pioneer in Yemenization will and commitment in facilitation of future investment in this sector. OMV Yemen GmbH, since its entry into Yemen in mid 2000s, has been open and responsive to suggestions of its partner the government and has been building excellent relationships.

Fadie Abdulrahman Shaif, HR Manager of OMV Yemen GmbH, is a distinguished national expert in Human Resource, with rich experience in the oil industry. Mr. Shaif shares his views on the challenges of the energy industry in Yemen particularly those related to the most controversial issue in the oil and gas industry: the Yemenization strategy. OMV Yemen GmbH, a leading operator in the country, is among the very few oil companies which achieved a remarkable ratio of 80 per cent of Yemenizing its manpower of around 400 employees. Here are some excerpts of the interview:

By NY Staff Reporter

NY: What are the principal challenges of the energy industry in Yemen, and how are they being overcome? FS: Challenges are part of any business and industry. It is not how many challenges there are. The real challenge, however, is our awareness of the existence of challenges; our capabilities to do something about them; how soon; and how effective. Critical elements to the success of any public-private partnership are transparency, mutual trust, and win-win relationships, in addition to operators’ proactive attitudes to work with regional governments, local customs and the Yemeni culture. Similarly, the administration has to show firm

NY: What is the make-up of the energy industry’s employees? Is there a deficit of vocational skills in Yemen as a whole? Is professional training in Yemen adequate? How can it be improved? FS: Considering the development of local manpower as a priority to ensure continued effective and safe operations, OMV Yemen GmbH is committed to the Yemenization program and is, for instance, striving to build an experienced local workforce as a lasting legacy. We, at OMV Yemen GmbH, are proud that - during the past four years - we have partnered with local and national authorities to build and further increase the skills of its national employees, in the process developing Yemen’s oilfield expertise for the long term. NY: What is the proportion of Yemenis - Expats working in the gas industry? FS: The number of Yemeni nationals employed at OMV Yemen GmbH has, since the start of

OMV Yemen GmbH: Pioneer in Yemenization

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We, at OMV Yemen GmbH, are proud that - during the past four years - we have partnered with local and national authorities to build and further increase the skills of its national employees, in the process developing Yemen’s oilfield expertise for the long term.

its operations some years ago, increased significantly. At the moment OMV Yemen GmbH employs almost 400 people. The Yemeni workforce in our company has continuously grown and exceeds the expatriate workforce now accounting for more than 80 percent of the operational workforce. It important to assure you here that OMV Yemen GmbH is committed to develop the capabilities of Yemen’s national oil industry by building a strong national workforce through what would become OMV’s ‘Yemenization & Development’ program. You can take this as an example. NY: What is your opinion on Yemenization goals? Some people say that it is not the proportion of workers that matters; rather, it is the number of senior posts given to Yemenis which is the important statistic. FS: Let me tell you something I am very familiar with. OMV Yemen GmbH’s Yemenization program is designed to increase the percentage of Yem enis in the company’s workforce by recruiting them and then engaging them in a

formal training and development program. The localization program also seeks to enhance the professional development of Yemenis. With high unemployment rates and a limited number of employment opportunities, recruitment is managed through a recruitment panel (committee) to ensure fair and equitable allocation of positions to qualified individuals. The human resources department of our company works closely with the governorate and with the GM of Yemenization within the Ministry of Oil and Minerals to advertise positions, test suitable candidates and fill positions whenever they become available. As with any regulated program, flexibility, equity and transparency are issues that need to be faced in a collaborative and open environment if the Yemenization program is to be successful and sustainable. Working closely with its government partners, OMV has been proactive in understanding issues associated with culture, language, customs, and education, to bring balance and a long-term vision of success to the Yemenization program.

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Yemenâ&#x20AC;&#x2122;s Human Resources

Strategic Planning is Key for Yemenization

Strategic Planning is Key for Yemenization other countries in a similar situation, and examine how they developed and overcame industry-relevant problems. However, in terms of human resources, one of the most relevant issues of the day is how we balance nationalities, experience and opportunities. A lot of this is rolled into ‘Yemenization’, a concept developed in the Ministry of Oil & Minerals. In my opinion the goals are commendable, but sometimes the implementation or follow-up in certain companies is not as good as it should be. However, across the industry does frequently reach 85 – 90% operator Yemenization rates However this statistic also includes the number of guards, cleaners and drivers. What really matters to me however, is not the proportion of Yemenis to expats, but the number of senior and technical posts secured by competent Yemenis.

By Nabil Dabwan HR Supervisor, Canadian Nexen

HR, human resources, is an interesting issue in the Yemeni oil and gas industries. It has characteristics which are quite unique, but it also has a much greater importance for us as it will shape the future of our companies, industry, and even national economy. Some problems, however, are not unique. In some areas, there is a definite deficit of vocational skills, but by no means in all sectors. Unfortunately, professional training is inadequate at the moment, but could be improved by developing a training specific a strategic plan, which would be shaped collaboratively, from both the Ministry of Oil & Minerals and all oil and gas companies working in Yemen. The absence of a long-term strategic plan is, on a general level, detrimental to Yemen realising its industrial potential. Yemen needs to coordinate industry developments in a way relative to demands, shortages and technology. To this end, we should also be looking to

Yemen Must Diversify – But How?

By Dr. Christopher Davidson Reader in Middle East Politics at Durham University and author of ‘Persian Gulf and Pacific Asia: From Indifference to Interdependence’

Yemen largely escaped the effects of the recent global financial crisis, but this was primarily due to the insulated nature of its financial system and its relative lack of integration into the international system, rather than due to any sound economic planning. Moreover, even though its annual GDP growth is still estimated to be around 3 to 4 percent and its economy appears to have bucked the regional trend, with nearby Gulf Cooperation Council states having either fallen into recession or facing years of stagnation, the reality under the surface is a lot less appealing. Yemen remains a very low income country that is highly dependent on oil exports, the revenues from which account for more than a quarter of the country’s GDP and now make up nearly three quarters of the government’s revenue. In 2009 the vulnerability of such hydrocarbon dependencies was underscored when oil revenues declined by more than a half – to less than $2 billion per annum - due to international price fluctuations. Fully recognised in Yemen’s Strategic Vision 2025 – a long term development plan first outlined in 2006 – the national economy must urgently diversify into other sectors if it is to enjoy sustainable growth in a post-oil future and if the government is to enjoy any future autonomy from the oil industry. In many ways, the urgency and

scale of the problem is now much greater than envisaged in 2006, with some analysts now predicting that Yemen could become a net oil importer as soon as 2015, and with oil production and exploration unlikely to be commercially viable as soon as 2021. Pressure will also increase on the national economy as a result of the country’s mushrooming youthful demographic. With Yemen’s population forecast to grow from its current 30 million to over 50 million by 2025, the unemployment rate – already standing at a precarious 20 percent according to the World Bank – will continue to rise, along with all of the associated economic and political instabilities of having a restless national youth. As it stands, the Strategic Vision 2025 is not yet working, as non-oil growth has actually fallen - from about 5 percent in 2008 to around 4 percent in 2010. Some of the sectors which have been earmarked for development according to the Vision, such as agriculture and fishing, while certainly important for food security, are unlikely to promote meaningful diversification of the economy as their growth potential and employment prospects will probably remain weak. More dangerously, some of the other sectors emphasised by the Vision, most notably free zones and tourism, may eventually expose Yemen to the same pathologies ex-

Yemen Must Diversify – But How?

perienced by some of its closest neighbours. With increasing free zone activity, most of which is aimed at attracting international investment by relaxing legislation requiring local partners for foreign businesses, there is a fear that Yemen, like Dubai before it, will fall into the trap of promoting the globalisation of its economy ahead of any real commitment to regional integration. In Dubai’s case the regional breakdown of companies operating in its free zones quickly became a nonMiddle Eastern majority, which soon led to a feeling among many Arab investors that such free zones were merely ‘foreign enclaves’ and therefore not really tailored to their needs. Without a safety net of regional integration Yemen’s free zones would likely

suffer in the event of another global downswing. Dubai is now grappling with a spiralling vacancy rate for commercial space in these zones, as foreign companies have closed down their outposts due to problems at home. Tourism is equally problematic, as both Dubai and Oman have experienced in the wake of the global financial crisis. Hotel occupancy rates have drastically declined, especially in Dubai, and resorts have had to slash prices in order to remain competitive, with tourism’s contribution to GDP having falling accordingly. Yemen’s tourist industry is likely to be a little more resilient, given the greater emphasis on cultural and historical tourism as opposed to the more basic sunseeking and shopping tourism in its neighbours, but it nonetheless

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With increasing free zone activity, most of which is aimed at attracting international investment by relaxing legislation requiring local partners for foreign businesses, there is a fear that Yemen, like Dubai before it, will fall into the trap of promoting the globalisation of its economy ahead of any real commitment to regional integration

Yemen Must Diversify – But How?

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[T]he best route for Yemen, or at least the best diversification strategy to adopt from its neighbours, is to build up heavy export-oriented industries. These could concentrate on the production of metals, plastics, fertilizers, and petrochemicals, all of which require abundant energy to manufacture and therefore best capitalize on Yemen’s current competitive advantage as an oil producer.

remains especially vulnerable to increased political instability. Any further deterioration in law and order would undoubtedly reduce tourist numbers, which currently stand at a modest quarter of a million per annum. Perhaps the best route for Yemen, or at least the best diversification strategy to adopt from its neighbours, is to build up heavy export-oriented industries. These could concentrate on the production of metals, plastics, fertilizers, and petrochemicals, all of which require abundant energy to manufacture and therefore best capitalize on Yemen’s current competitive advantage as an oil producer. They would also provide much better employment opportunities for young Yemenis entering the manufacturing sector which, at present, employs

less than 150,000 and still accounts for less than 10 percent of the country’s GDP. Yemen must also prioritize its role as an entrepôt for regional and international trade. Although discussed at some length in the Vision’s supporting documents, the necessary infrastructure for such a role does yet seem to assume the primacy it deserves. Yemen’s key asset, along with oil, must surely be its geographic location, enjoying both Red Sea and Indian Ocean access. If its ports can be brought back up to international standards, as they once were, then they will be well placed – much better than those in the Gulf Cooperation Council states – to prosper from the fast growing trade triangle between the Middle East, Africa, and the Far East.

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HYDROCARBON BLOCK CONCESSION MAP: SATELLITE VIEW

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Graph by National Yemen (Source data: MOM)

104 Maps & Stats

Graph by National Yemen (Source data: MOM)

Maps & Stats

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Maps & Stats

Graph by National Yemen (Source data: MOM)

Maps & Stats

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Graph by National Yemen (Source data: MOM) Graph by National Yemen (Source data: MOM)

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Oil Sales & Exports

Graph by National Yemen (Source data: MOM)

Maps & Stats

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Acknowledgments

Acknowledgments Iâ&#x20AC;&#x2122;d like to take this opportunity, at the end of this achievement, to say a few words, to give credit where credit due. Without the help and hard work of all the staff members of National Yemen, their firm commitment and teamwork, as well as the encouragement of friends and supporters, and oil industry experts, this book would not have been possible. Firstly, I must express my gratitude to Mr. Will Carter for his energy in visualizing and coordinating parts of this project where I could not. Mr. Nasser al-Humaidi, the chairman of PEPA, also deserves our sincere thanks, as he welcomed the concept of this publication, and selflessly strove to help us realize it In particular, however, we should thank Mr. Mohammed Al-Asaadi, who shared his great, professional experience with us, and helped us stylize and professionalize this publication. The technical and logistical team, and their tireless efforts in this production, must not go unheeded. In particular, I extend my gratitude to Nageeb Abdulwahed, Wardah Al-Shawish, Jihan Anwar, Hind Al-Eryani, Mohammed Anees, Salah Othman and Qassim Al-Haddi. I should end by thanking my loving family for their endless patience, concern and interest â&#x20AC;&#x201C; without which, we would not be celebrating this success. Thank you all

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