Yemen's Push Into the Gas Sector Is Being Muffled
Lack of interest and the country's vulnerability to terrorism are among factors hindering potential revenue.
With Yemen's oil revenues plunging, the government's push into the gas market seemed like an economic saving grace for a state wracked by poverty and terrorism, but analysts warn more thought should be given to carving out the country's post-petroleum era.
The infamous Christmas Day bomber's attempts to blow up a jet approaching Detroit -- which Yemen-based al Qaeda in the Arabian Peninsula claimed responsibility for -- has drawn unwanted attention to the country's vulnerability to terrorist movements.
Dwindling oil and water resources, high poverty and illiteracy, a ballooning population, rebel uprisings, and separatist movements have made Yemen ripe for extremism.
Nestled in the southern tip of the Arabian Peninsula, Yemen is highly reliant on oil money, which accounts for 70% of the budget. But total reserves amount to about 2.8 billion to 3 billion barrels, which "really isn't much to write home about," S. Rob Sobhani, president and founder of Caspian Energy Consulting in Potomac, Maryland, told OilPrice.com.
In recent months, the government has tried to spark foreign interest: A delegation from Indonesia visited Sanaa, the Yemeni capital, in January to discuss investment in the oil and gas industry as well as the mining sector. And in February, France's Total (TOT) signed a preliminary oil exploration deal for $32 million. The company was already leading a $4.5 billion liquefied natural gas plant that started production in October.
Major gas exports, however, are probably not "in the cards" for the Middle Eastern country, but some reserves may be moved within the region by pipeline to Oman and possibly to Saudi cities like Jeddah, Sobhani said. Yemen is strategically advantageous to all liquid natural gas markets, both in the Asia-Pacific basin and on either side of the Atlantic Ocean, he also wrote in the Christian Science Monitor in February.
Yemen needs "built-in consumers already lined up" to fuel the gas sector but where such interest will come from remains unclear, said Christopher Boucek, an associate in the Middle East program for the Washington-based Carnegie Endowment for International Peace. Boucek cited huge, "unfounded" fears in the United States that Yemeni natural gas tankers entering Boston's port, for example, constituted "some sort of a threat to national security."
Apart from drying-up oil reservoirs, the government is also contending with a legal process -- and "mechanics on the ground" for exploring, producing, and extracting gas -- that are "not very well streamlined," Boucek noted, adding that Sanaa aims to fix these problems in a bid to court more foreign investors.
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