Liquefied gas in Yemen.. An energy that has been idle for years, wasting billions of dollars

Although Yemen's liquefied gas capacity is ranked among the largest in the world, the country has been unable to export for many years, losing an important financial resource amid political conflicts and a difficult economic situation.

Yemen is among the 20 largest countries in the world with a capacity to produce liquefied gas of 6.7 million tons annually, but it has been idle since the middle of the last decade, and has only been operating for 7 years, according to data from the Energy Research Unit (based in Washington).

The Arab country's natural gas reserves amount to 16.9 trillion cubic feet (0.47 trillion cubic meters), according to Oil & Gas Journal estimates, while official statements indicate that gas reserves amount to 20 trillion cubic feet (0.56 trillion cubic meters).

In 1984, Yemen discovered natural gas, simultaneously with the discovery of oil, in the Ma'rib-Al-Jawf oil basin, in both types, whether associated gas or non-associated gas.

Historical stations of the liquefied gas project in Yemen

In the 1990s, Yemen began to think about making better use of the country’s gas reserves and exporting them abroad to achieve greater returns. This resulted in the signing of an agreement to implement the natural gas liquefaction and export project in 1997.

The following are the historical milestones of the liquefied gas project in Yemen:

1995: Establishment of the Yemen Liquefied Gas Company.
1997: Parliament ratifies the gas development agreement.
2005: Construction of the LNG terminal and pipeline begins.
2009: Export of the first shipment of Yemeni liquefied gas.
2010: The LNG project was fully operational.
2016: LNG station shut down due to war.

Balhaf LNG Project

In 1995, the country decided to begin a study to establish a liquefied natural gas project in Yemen, which included surveys of potential sites to determine the best area in which to implement the station.

Studies have concluded that the city of Balhaf, overlooking the Gulf of Aden, is the most suitable area for establishing a station to liquefy natural gas extracted from the city of Marib, located northeast of the Yemeni capital, Sana’a.

One of the most prominent features of the coastal “Balhaf” was the low natural and geographical risks, and its natural depth that helped in receiving huge tankers.

It is also distinguished by its geographical location, which allows the company easy access to the Asian, European, North and South American markets.

By 2004, Yemen had begun drilling and laying a 320-square-kilometre pipeline from the Block 18 fields in Marib to the coast of the Balhaf area on the Gulf of Aden.

Yemen has decided to allocate 9.15 trillion cubic feet (0.26 trillion cubic meters) of the gas reserves in those fields for export, while it was decided to allocate 1 trillion cubic feet (0.03 trillion cubic meters) of that amount to meet the needs of the local market.

Export contract signing phase begins

The investment cost of implementing the liquefied gas station in Yemen amounted to about 5 billion dollars, including 2.8 billion dollars in international financing loans.

The project consists of two production lines with a capacity of up to 3.35 million metric tons per year (4.5 billion cubic meters) for each line.

In August 2005, the Yemen LNG Company succeeded in signing long-term sales and purchase contracts of up to 20 years with 3 international companies.

The South Korean Gas Corporation (KOGAS) won the first contract to purchase Yemeni liquefied gas, then the second contract with GDF Suez - currently "Engie" - and the third contract with Total Gas & Power to purchase the remaining quantity, to be distributed as follows:

Kogas: 2 million tons.
Engie: 2.5 million tons.
Total: 2 million tons.

In May 2008, Yemen LNG signed agreements with European and Asian banks and credit agencies to finance the project for $2.8 billion, representing 58% of the project cost.

Who owns the LNG terminal in Yemen?

The Yemen LNG Company operates the Balhaf facility, whose shares are distributed among 7 companies and institutions, including two international companies, two institutions affiliated with the Yemeni government, and 3 partners from South Korea, as shown by the following shares:

TotalEnergies: 39.62%
Hunt Oil Company: 17.22%
Yemen Gas Company: 16.73%
SK Korea: 9.55%
Korea Gas Corporation (KOGAS): 6%
Hyundai: 5.88%
General Authority for Social Insurance and Pensions of Yemen: 5%

Export start until current stop

In November 2009, Yemen began exporting liquefied gas from the Balhaf terminal to American and Asian markets, amid official estimates at the time that the liquefied gas project in Yemen would represent the country's largest independent income over 20 years.

In early April 2010, Yemen began operating the second LNG production line, bringing the facility to full capacity.

The government received its first revenues from LNG sales in Yemen in 2009, while the shareholders received their first share of profits in 2012.

The following chart - prepared by the Energy Research Unit - monitors Yemen’s exports of liquefied gas during (2009-2015):

Yemen's LNG exports

Data reviewed by the Energy Research Unit shows that Yemen’s liquefied gas exports recorded leaps during the period from 2009 to 2014, then declined sharply, and then stopped since 2016.

This comes after the outbreak of war in Yemen in 2014, the Houthi group’s coup against the internationally recognized government in Sanaa, and its attempt to seize the fields in Marib.

In its first year, Yemen exported about 0.4 billion cubic meters of liquefied gas, and exports jumped to 5.5 billion cubic meters in 2010.

In 2011, Yemeni LNG exports jumped to 8.8 billion cubic meters, reaching an all-time high in 2013, at 9.9 billion cubic meters.

Exports then fell to 9.4 billion cubic meters in 2014, falling sharply to 1.9 billion cubic meters in 2015, and since 2016 the country has not exported a single LNG shipment to the global market.

The Yemeni government accused the Houthi group of being behind the halt in Yemen’s liquefied gas exports from the Balhaf terminal, with many officials and experts linking the resumption of exports to Iran stopping its support for the Houthis.

Yemeni Oil Minister Dr. Saeed Al-Shamasi asked Tehran to stop supporting the Houthi rebels and the battles, so that his country can enjoy its natural resources, explaining that his country has natural gas reserves amounting to 20 trillion cubic feet.

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