Natural gas for South KoreaYemen LNG close to huge deal [Archives:2005/812/Business & Economy]

January 31 2005

South Korea is coming close to choosing who will provide natural gas and it looks like Yemen LNG is in a good position to be one of the winners.

On January 10, Yemen LNG submitted its offer to state-run Kogas, the world's largest buyer of liquefied natural gas (LNG). The bid included three contracts totaling six million tons of natural gas for 20 years. The South Korean government is expected to make its decision in February.

Last September, Yemen LNG put in a bid to supply natural gas after the South Korean government sent invitations to nine countries to bid for gas projects. It is reported that around five of those that put in bids are now being considered to be suppliers, and South Korea will probably use several to carry out the projects.

According to Jean-Francois Daganaud, General Manager of Yemen LNG, Yemen aims to capture more than one market. Along with South Korea, Yemen is pursuing China, Japan, India, the United States and European countries.

“We want several customers,” said Daganaud. “The processing plant will be able to deliver to several buyers.”

After the Asian economic crisis in 1997, Yemen LNG had difficulties finding a market. But with economic growth back on track and demand for natural gas rising, Yemen LNG is now optimistic.

“Two years ago it was very difficult to see opportunities in the energy market,” said Daganaud. “But in the last 12 months, the energy market has become very favorable. Consumption has climbed in the Far East, China realized that it was in need of energy and the United States became aware that their reserves were not good enough.”

It is estimated that Yemen has 16 trillion cubic feet of natural gas below its surface. 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.