A benefit to the private sectorNew $300 million oil refinery on the Red Sea [Archives:2004/785/Business & Economy]

October 28 2004

It was announced last week that the construction of a new oil refinery located at Ras Issa on the coast of the Red Sea will begin early next year.
The refinery, which is expected to be up and running in early 2007, is planned to have the capacity of 50,000 to 60,000 barrels per day (bpd). It will be near the terminal of the pipeline coming from the oil fields in the Marib province that was built by Hunt Oil.
Forty percent of the $300 million oil project will be financed by Yemeni businessmen, while the rest will come from foreign investors and financial institutions. It is reported that the leading local investor is Hayel Saeed Group.
Some believe that along with the new refinery helping to meet an increase in local demand of petroleum products, the government allowing private investors to take part in the refinery is a big plus.
“This shows that the government is willing to handover projects such as these to the private sector,” said Ismail Noman, an independent consultant in the petroleum industry. “This is a benefit to the private sector which can help Yemen's economy in the future.”
Yemen now has two oil refineries, one located in Aden with the capacity of 150,000 bpd, and the other in the Marib province producing 10,000 bpd. The refinery in Aden was built by British Petroleum in 1954 but was nationalized by the Yemen government in the late sixties.
“The oil refinery in Aden is old and the one in Marib is small,” said Noman. “This refinery will be modern and will fit with international standards.”
On a daily basis, Yemen produces roughly 450,000 barrels of oil, and around 85% of the government's revenue and 70% of the country's export revenue comes from oil.
Yemen also has around 16 trillion cubic feet of natural gas reserves. Yemen LNG, the company responsible for the country's natural gas, believes that Yemen can produce and export 6.2 metric tons annually for the next 25 years.
Yemen LNG put in a bid last month to supply natural gas for South Korea. It is also negotiating with the United States which will be in need of natural gas in the near future.
Once Yemen LNG captures a market for gas, a pipeline will be constructed stretching from Marib to the coast near Mukalla where a liquefaction plant will also be built.
Yemen has had plans to build an oil refinery in the Mukalla area financed by investors from Saudi Arabia and the United Arab Emirates. Even though the construction of the $900 million refinery was scheduled to start this year, the project has yet to get off the ground.