Yemen LNG is optimistic about the future [Archives:2004/776/Front Page]

September 27 2004

By Peter Willems
Yemen Times Staff

Now that Yemen LNG has this month put in a bid to supply natural gas to South Korea, Jean-Francois Daganaud, Yemen LNG's General Manager, has expressed confidence that Yemen will capture a market soon.
“The international gas market has become the most favorable since we first started out the project in 1995,” said Daganaud.
Korea Gas, which sent invitations to nine countries to bid for gas projects, is expected to finalize its selection and sign agreements with multiple suppliers next December.
“It is competition, and you have to race well, be trained well, and be fully prepared,” said Daganaud. “We are well prepared to market in South Korea.”
Daganaud believes the Yemen LNG has advantages over the competitors battling it out to sign up with South Korea.
“One of the advantages our competitors don't have is our unique Korean content,” said Daganaud.
Two South Korean companies, SK Corp. – which is the largest oil refiner in South Korea – and Hyundai, have a 16% stake in Yemen LNG. The Yemen gas company believes that South Korean partners in the company should give it an edge on doing business in the new market.
SK Corp. has already been successful working in Yemen. “SK Corp. is a partner producing oil in Marib, which has been producing oil since 1986,” said Daganaud. “So a South Korean company has been successful in Yemen.”
Another Yemen LNG strategy that might bring positive results in the South Korean bid is that it offers the buyer the to opportunity to invest, and own equity, in the company.
But Daganaud is optimistic beyond the South Korean market. The United States has been dependent on its own supply and natural gas imports from Canada. Exploration for natural gas has not been successful enough to meet future consumption demands in America, and it will soon be in need of getting gas from elsewhere.
Daganaud believes that since many suppliers of natural gas between Yemen and the United States are already committed to projects, Yemen LNG has a good chance of winning the US market.
“Our delivery time, which can be as early as 2008 or 2009, is a big advantage in going after the US market,” said Daganaud. “There are no delivery locations closer than Yemen. Other suppliers, like Egypt and countries in North Africa, are fully booked, so we may be the best supplier of gas to the United States.”
Talks between Yemen and the United States are under way, and the possibility of an agreement may come out as early as December.
Yemen LNG is also taking advantage of Yemen's location by looking into India as a potential buyer.
Since Yemen LNG started up in the mid-nineties, it has had a difficult time finding a buyer. Although the company was ready to pursue a market in the Far East, the Asian economic meltdown in 1997 destroyed any chance of finding a customer.
But in the last couple of years, Asian markets have picked up.
“Asian countries have recovered from the crisis, and gas consumption is increasing again,” said Daganaud. “There is now higher energy demand in China which affects the whole Far East. With each country's demand on the way up, there will be a strain on supply with competition in the Asian energy market.”
Many believe that Yemen LNG securing a market could not come at a better time. Yemen produces roughly 450,000 barrels of oil, and the flow of oil takes up more than 30% of the country's GDP. Over 70% of the government's revenue and around 70% of the country's export revenue comes from oil.
But according to The World Bank based in Yemen, oil production has leveled-off and is heading towards a steady decline in the next decade as reserves have started drying up. The best alternative is natural gas. Yemen has 16 trillion cubic feet of natural gas below its surface, and it can produce and export 6.2 metric tons annually for the next 25 years.
If an agreement or agreements are signed, Yemen LNG is ready to begin the gas project. Partners in Yemen LNG, including France's Total, state-owned Yemen Gas, Texas-based Hunt Oil, SK Corp. and Hyundai, will invest $2 billion to build a pipeline from Marib to Bal Haf near Mukalla and a liquefaction plant. The project can be completed in 43 months.
Yemen Hunt Oil Co. extracts three billion cubic feet of gas daily in the Marib region, strips out 22,000 barrels of liquids to add to crude oil then re-injects gas back into the ground.
Daganaud said that if Yemen captures a market in the East and the United States, Yemen LNG will be able to provide gas for both.
And now that the climate of the international natural gas market has changed for the better, Yemen's long wait to find a buyer will finally pay off.
“This change in the gas market has given new opportunities to Yemen LNG,” said Daganaud.