India looking for sellerPumping Yemen’s natural gas [Archives:2004/798/Business & Economy]

By Peter Willems
Yemen Times Staff
India announced last week that Yemen might be one of its suppliers of liquefied natural gas (LNG) after negotiations with Iran fell through.
Talks held at the ministerial level in Tehran were unable to finalize a deal for India to buy five million tons of LNG from Iran resulting from a disagreement on the price. India was demanding a fixed-term/fixed price agreement similar to its contract with Qatar. Iran was pushing for the price to be linked to the Brent crude oil price that fluctuates.
“At current crude oil prices, LNG would cost us over $4 per million British thermal unit (MBTU) as compared to Qatar LNG of $2.53 MBTU,” said an Indian official after the talks. “With such high prices, Iran is a closed chapter for us.”
The official added that India is talking with Yemen and Qatar to provide 10 million tons of LNG. “Price negotiations are on with Yemen and Qatar,” said the official.
Qatar already supplies India with five million tons of natural gas, and in 2008 and 2009 it will deliver another 2.5 million tons.
“Yemen is looking for a new market. This one depends on the offer coming from India,” said Mohamed Al-Hawri, Professor of Economics at Sana'a University. “On principle, Yemen wants to export natural gas according to good conditions.”
Yemen LNG – the company responsible for Yemen's natural gas – has been looking for customers since the mid-nineties. After Asian countries faced an economic crisis in 1997, the chance of capturing a market faded. Now that economic growth in Asia and other parts of the world is back on track, Yemen has a better chance to find a customer that is in need of natural gas.
Along with looking into India, Yemen put in a bid to win over South Korea last September. The results are expected to be announced within a couple of months. Yemen LNG said recently that it is also negotiating with the United States which is searching for alternative sources of natural gas as its reserves are declining.
It is estimated that Yemen has 16 trillion cubic feet of natural gas below its surface. According to Yemen LNG, Yemen can produce and export 6.2 metric tons annually for 25 years.
In the Marib province, Yemen Hunt Oil Co. extracts more than 3 billion cubic feet of gas per day, strips out 22,000 barrels of liquids to add to crude oil then re-injects gas back into the ground.
Once there is a customer, Yemen LNG will build a 320-kilometer pipeline that will carry gas from Marib to Bal Haf, a site on the coast west of Mukalla where a liquefaction plant will be built.
Shareholders of Yemen LNG (France's Total, state-owned Yemen Gas, US Hunt, and South Korea's SK and Hyundai) will pump over $2 billion into the project if there is a buyer, and the pipeline and plant will take around 43 months to be completed.
Yemen finding a customer may be critical in the near future. Over 70% of the government's revenue and around 70% of the country's export revenue comes from oil. More than 30% of Yemen's GDP depends on the flow of oil. The World Bank recently reported that after oil production leveled off in the last few years, it dropped nearly nine percent in 2004.
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