SANA'A -- The Yemeni government announced on Saturday that the Yemen LNG liquid natural gas plant in Balhaf, Shabwa, had reached its full export capacity of 6.7 million tons per year. This would bring USD 700 million a year to the country's budget.
But two prominent Yemeni economists told the Yemen Times that the project will not bring about change in the livelihoods of Yemenis, as the price of the gas to be exported has already been defined at less than USD 4 for one metric ton for the next 20 years of production. They added that the government has sold the liquid natural gas for a lower price than prices on the international market where prices fluctuate on a yearly basis.
Yemen's natural gas reserves are estimated at over 17 trillion cubic feet, according to the Ministry of Oil and Minerals, compared to Saudi Arabia's 248 trillion cubic feet, according to the Saudi Ministry of Petroleum and Minerals.
Yemen's economy is highly dependent on depleting oil reserves with no serious development of other promising sectors, according to economists.
Around 59 percent of Yemenis population lives under the poverty line, according to the United Nations' Development Program in 2009. In addition, the country's unemployment rate of 40 percent is increasing, as Yemen's population grows at a rate of three percent per year.
Leaders have called on foreign investment to boost the country's economy, but with six years conflicts in Sa'ada as well as growing violence in the south, investors have often held back from doing business in the country.
Yemen LNG was established in 2005 to liquefy its natural gas reserves and export them from the port of Balhaf in the Shabwa governorate. In November 2009, Yemen exported its first gas shipment.
Shareholders in the company include the Yemen Gas Company with 17 percent of the shares, Total with 40 percent, Hunt 17 percent, the South Korean Corporation with ten percent, Korean Gas Corporation KOGAS with six percent, Hyundai with six percent and the Yemeni General Authority for Social Insurance and Pensions with five percent.
The Yemeni government and Total signed an agreement in 1997, according to the Ministry of Oil and Minerals.
"As the agreement has defined the prices, when the project reaches its full production capacity, revenues will be USD 700 million annually for 20 years," Ali Al-Wafi, Yemeni economist told the Yemen Times. "It may alleviate the dwindling revenues from oil, but it will not compensate for it completely."
Al-Wafi said that what is important in this new gas project is how to manage its revenues as Yemen obtained USD 30 billion from oil resources during the past ten years, but no economic and development impacts have been achieved.
"Those huge oil revenues during the past decade have not led to real improvement in the livelihoods of Yemenis and infrastructure is still weak," Al-Wafi said. "So what do you think of the gas revenues expected to be less than those from oil?"
"If resources are not being used properly, they are a curse, because it will not be used for right purposes and that leads to political, economic and social deterioration," he said.
Dr. Mohamed Jubran, professor of economics at the University of Sana'a and a financial analyst, told the Yemen Times that the LNG project is still "ambiguous" as the contract signed by the government of Yemen includes constitutional violations.
Yemen's constitution states that the government cannot sign such an agreement without being approved by the parliament, according to Jubran.
"The Oil Committee members in Parliament asked government not to sign the contract until it was approved by the parliament," Jubran said. "Despite this, the government signed the contract that deprives Yemen from huge revenues."
The professor said that the government has so far denied economists and lawyers the right to discuss the contract to amend it and to enable Yemen to recovers its rights.
"Within the current contract, I do not expect any improvement in revenues for the budget according to a statement made by the Minister of Finance one week ago in which he stated that expected gas revenues were not promising," said Jubran. "This is in addition to my own previous expectations, based on studies I conducted that proved that local gas sales that are equivalent to a tenth of gas exports will generate more budget revenue than the exports do."
The Yemen Times contacted the Yemen LNG, but they declined to comment.
By Ali Saeed
© Yemen Times 2010
