Yemen private sector embarks on oil industry investment [Archives:2006/915/Business & Economy]

January 26 2006

The Hayel Saeed Anam industrial and trading group is to begin work on the first private sector Ras Issa oil refinery in May. Investment in this venture is $450 million and targeted production capacity is 60,000 barrels per day (bpd).

Oil sources said Hood Oil Company, a subsidiary of Hayel Saeed which owns 50 percent of the project, has completed all economic, environmental and technical studies for building the refinery. Hood Oil is assisted by International Finance Corp (IFC), the World Bank's private sector lending arm. Sources noted that Hood Oil will offer part of its stakes to local investors. The Hood Oil source affirmed that the company will cover 90 percent of domestic oil product needs, exporting the remainder.

The source said India's Reliance Industries will have a 25 percent stake in the refinery. India's Reliance Industries is one of the largest private sector oil refinery companies in India and operates a refinery with 660,000bpd capacity.

The IFC said the project will help Yemen obtain reasonably-priced refined oil products and reduce oil tanker passage along the Red Sea coast, thereby reducing the danger of oil spills, while at the same time enhancing Yemeni private investment contributions in the oil sector.

Last September, the Yemeni government signed an agreement with the IFC whereby the latter would open an office in Yemen. The agreement's signing was concluded by Yemeni Minister of Planning and International Cooperation, Ahmed Soufan, leader of Yemen's delegation to the Financial and International Corporations annual meeting last September with IFC deputy chairman Assad Jaber. Soufan praised IFC policy of financing huge industrial projects in Yemen, including the $450 million Ras Issa oil refinery project.

Yemen is a small, non-OPEC oil-producing country whose estimated production capacity is 450,000bpd from its two oil refineries in Aden and Marib.