Yemen oil investment bid faces challenges [Archives:1999/32/Business & Economy]
From the Columns
Yemen hopes to shake off its reputation as a land of risk and attract fresh foreign investment in its tiny energy industry amid a fierce international race for big deals in neighboring oil giants. More than 100 Westerners – including oil workers – have been abducted by disgruntled Yemeni tribesmen in the past six years, damaging the country’s image abroad.
The main oil pipeline – backbone of the cash-starved economy – has been bombed more than 15 times in the past year. However, western oilworkers have not been put off work in the poor Arab country, dwarfed by regional oil powers Saudi Arabia, Iran, United Arab Emirates, Kuwait and Qatar. They say Yemen has the key element for a spot on the international oil map – an unexplored potential. The country expects its crude oil production to reach 412,000 barrels per day (bpd) by the end of 1999, up from 385,000 bpd. “Despite some difficulties and turmoil we have enjoyed some considerable success and growth.
We are optimistic and have reached record levels of production,” said Waleed Jazrawi, general manager of Canadian Occidental Petroleum Ltd, Yemen’s biggest oil producer. “We are optimistic.” The firm’s production at the Masila project in Yemen set a new quarterly record of 210,000 barrels per day (bpd) in the second quarter of 1999. It also has added 40 million barrels of oil to its proved reserves at the site for the low cost of $2 per barrel. Canadian Occidental confident of continued strong production, plans to stay in Yemen for the long haul. It competes with about 30 other foreign energy companies including Royal Dutch/Shell Group ,Agip SpA , Exxon Corp and British Gas. But Yemen, analysts say, could have a tougher time luring other global oil firms to invest while countries like OPEC Power Iran are offering production deals worth billions of dollars. Saudi Arabia Ñ the world’s biggest oil producer Ñ is busy reviewing proposals made by international oil companies responding to a call for a fresh foreign investment. “We don’t see the same kind of potential in Yemen as in Iran, for instance.
We don’t see large material opportunities that we can access,” said an official from one of the world’s biggest oil companies who is involved with new business ventures in the Middle East. Despite such bearish views, Yemen is taking the initiative. It plans to promote seven new oil blocks for exploration in London and Houston road shows starting next month. Western Geophysical, which is organizing the conferences and collecting seismic and well data to present to foreign oil firms, said the most aggressive foreign companies will stand the best chance of capitalizing on Yemen’s offers. “As far as incentives, we are trying to encourage oil companies to come and explore and sign production sharing deals,” said Roshan Darwish Ali, project manager in the company’s new venture group. “We are not looking for big amounts of signature bonuses. It depends on how aggressive they are in playing the game. It’s up to the oil companies to sit across the table at the Ministry of Oil and negotiate terms and conditions,” he added. “There is potential. None of the offshore areas have been explored. It’s virgin territory.” Ali, as well as Western oil executives, play down recent violence against foreigners in Yemen, which is banking on oil deals to help boost a weak economy and fund badly-needed development projects. Most foreigners kidnapped in Yemen have been released unharmed, but in December a militant Islamic group kidnapped 16 Western tourists of whom four were killed in a rescue attempt.
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