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Country name: Republic of Yemen
Population: 22,230,000 million (July 2007 estimate)
Land Area: 527,968 km²
Official Language: Arabic with English used in business
Currency: Yemeni Rial
Capital: Sana’a
Yemen is situated in the south-western corner of the Arabian Peninsula, bordering Saudi Arabia to the north, the Red Sea to the west, Oman to the east and the Arabian Sea to the south. The country has a coastline of about 1,906km and its coastal plain, the Tihamah, averaging 48km in width, is a region of semi-desert. The vast mountain range of the southern Arabian Peninsula runs through the country, with its highest peak, Hadur Shu'ayb at 3,760 metres. Topographical variations in the region give rise to a wide range of climatic conditions, and its fertile highland plateaux are ideal for growing a wide variety of both tropical and temperate zone crops. The highland regions are interspersed with wadis, the river valleys which dry up during summer months.
The northern region is rich and fertile, with regular rainfall provided by the effect of the mountains on the Indian Ocean monsoons. Crops include coffee, cotton, sorghum, corn, oats, barley, dates, almonds grapes and the qat leaf, which resembles a form of chewing tobacco. Farming activities also include the breeding of livestock, such as cattle, sheep and goats. By contrast, only about 2% of the southern region is arable with most farming activity confined to the Hadhramaut valley. In the northeastern region of the country, the mountains gradually merge with the Rub al-Khali desert and little agricultural activity beyond herding is possible.
Yemen’s economy is highly dependent on oil production, with the country’s oil exports accounting for 70% of government revenues. Yemen now plans to invest some $12,600 million on projects over the next four years to boost GDP growth by more than 7% a year. Investment opportunities do exist especially following last November’s international donor conference hosted in London by the Department for International Development (DFID) which saw $4.7 billion committed to the country’s development.
Following areas where commercial opportunities exist can be pointed out:
medicines and pharmaceuticals; agricultural and irrigation equipment; food processing and equipment, especially fish; oil and gas machinery, especially LNG; banking services; and electrical power with new power plants and distribution systems planned over next few years.
With regards the oil sector in 2006, exports reached around 330,000 barrels per day (bbl/d), primarily to Asian markets in China, India, and Thailand. Between 2000 and 2005, real gross domestic product (GDP) growth in the country averaged 4.4%. In 2006, the economy grew by 3.9% (2007: 2.5% estimate). Recent high oil prices have increased hard currency receipts and remittances from Yemenis abroad. However, high oil prices have also increased the country's expenditures on petroleum product subsidies, which cost hundreds of millions of dollars per year and constitute a heavy burden on the country's budget.
The country aims to attract foreign investment in order to reverse a recent decline in crude oil production. Yemen is a small, non-OPEC oil producer with proven crude oil reserves of 4 billion barrels in 2006. The oil is concentrated in five areas: Marib-Jawf - Block 18 (estimated 800 million barrels) in the north; Masila - Block 14 (estimated at 800 million barrels) in the south; East Shabwa - Block 10A (estimated 180 million barrels); Jannah - Block 5 (estimated 345 million barrels) and Iyad - Block 4 (estimated 135 million barrels) in central Yemen. Despite recent declines, Yemen has optimistic plans to boost output to 500,000 bbl/d in the next few years. The country is also talking about setting up a national oil and natural gas company, to be called Petro-Yemen.
Production is heavily dependent on private foreign companies, with more than 20 foreign firms operating concessions in the country. Numerous other foreign and domestic companies are partners in these concessions, including ExxonMobil and TransGlobe Energy. Yemen is divided into 87 blocks, of which 12 actually produce oil. Around half of the blocks have been licensed for exploration and possible production of oil and/or natural gas. Due to a combination of economic and security issues, Yemen has – beside the major international oil companies – targeted smaller, independent oil companies to take part in Production Sharing Agreements.
Yemen General Corporation for Oil & Gas/Mineral Resources has subsidiaries including the Yemen Oil Company (YOC) and the Yemen Refining Company (YRC). The company is responsible for managing the industry contracts and relations with operators and partners, as well as the government's share of crude exports.
Despite declining output in mature fields, Yemen's immediate goal for the petroleum industry involves increasing oil production and oil exports. To achieve this, oil exploration activity has accelerated since 1997. In September 2005, PEPA launched a third upstream bidding round with the intent of awarding 14 blocks at the end of November 2006. The blocks are located in Hadramaut (6 blocks), Mahra (3 blocks), Shabwah (2 blocks) and Hodeidah, al-Jawf and Aden/Abyan (1 block each). In March 2006, PEPA pre-qualified 34 companies for the tendered blocks which included Total, Petronas, OMV, Occidental and Petrobras. It is expected that exploration companies will make oil discoveries in 32 Yemeni blocks by 2011. These discoveries will primarily be the result of increased foreign investment.
In June 2004, Yemen offered newly demarcated Blocks 69-74 up for bid (Blocks 69-70 are in the Sabatain Basin, Blocks 71-74 are located in the Masila/ Shabwa Basins). In the same month, PEPA awarded a consortium including Norway's DNO and Canada's TransGlobal Energy exploration rights to Block 72. The oil concession encompasses 1.797km2 and is located next to Nexen's holdings. Yemen awarded China's Sinopec rights to explore blocks 69 and 71, while Dove Energy acquired Block 73. In mid-September 2005, Yemen awarded Korea's KNOC the rights to develop and operate Ayad (Block 4), which produces around 500 bbl/d.
The Yemen oil ministry places oil tenders up for bid on a semi-annual basis. Contracts typically involve a 2-3 year exploration period and a 20-year production concession. In late 1999, the government took steps toward improving investment in the country’s oil, natural gas, energy and petrochemical activities by redefining terms for certain concession agreements. These more favourable terms include lower signature bonuses, an increase in the proportion of oil earnings that companies can claim for development cost recovery to between 50% and 70% (compared with a previous range of 25-45%), and the introduction of a sliding scale of 3-10% for royalties (compared with a previous flat fee of 10%). In mid-2001, Yemeni officials took further steps to improve the energy-related investment climate, announcing a policy of contract extensions, added flexibility on negotiations, and a commitment to amending existing legislation if necessary. In early 2006, Yemen began looking at ways to revise the oil and natural gas licensing terms to increase transparency.
Yemen has an integrated network of pipelines to transport crude oil and natural gas produced in three central areas. This 560-mile network connects with four longer pipelines that transport oil to several major export terminals.
In June 2006, Calvalley reached a tentative agreement with the Yemeni government to construct a pipeline from production facilities in Block 9 to the Safar Facility. Currently, the Yemeni government and Calvalley are preparing a Tariff and Facilities Usage Agreement for the Safar Facility. Oil from the pipeline would be exported from the Ra’s Isa offshore export terminal on the Red Sea.
In July 2002, the government of Yemen approved an agreement in principle with Saudi Arabia for studies to be made on the first international pipeline from Saudi southern oil fields to the Yemeni port at Hadramout. The two governments are conducting further negotiations on this project. The pipeline will be used for exports from exploration and production (E&P) ventures in the Saudi portion of Rub' Al Khali involving a Shell-Total partnership, LUKoil of Russia, Sinochem of China, an Agip-Repsol partnership.
Yemen currently has a crude refining capacity of 130,000 bbl/d from two ageing refineries. The refinery in Aden, operated by Aden Refinery Company (ARC), has a capacity of 120,000 bbl/d, while capacity at the Marib refinery, operated by Yemen Hunt Oil Company, is 10,000 bbl/d.
Yemen had 16.9 trillion cubic feet (Tcf) of proven natural gas reserves in 2006 with the bulk concentrated in the Marib-Jawf fields (Block 18). Currently, the natural gas extracted as by-product of oil production is re-injected.
Since the mid-1990s, a primary interest of Yemeni natural gas development has been focused on the export of liquefied natural gas (LNG). In 1997, a group of foreign and domestic companies established the Yemen LNG project. In August 2005, after some setbacks, the authorities approved three LNG supply agreements - for 6.7 million tons per year - with KOGAS (1.3 million tons per year), Total (2 million tons per year), and Tractebel (2.5 million tons per year). In early September 2005, an engineering, procurement and construction contract was awarded for the project. First shipments of LNG are expected by the end of 2008, with natural gas likely to flow to the United States and South Korea. Natural gas for the LNG project will come from the Marib-Jawf field operated by SEPCO. Infrastructure includes three pipelines from the fields at Marib and a two-train liquefaction plant at the Arabian Sea port of Balhaf, south of Al Mukalla. Current stakeholders in the Yemen LNG project include Total (39.6%) Hunt Oil (17.2%) and Yemen Gas Company (16.7%).
Growing regional competition, especially from Oman and Iran, has been the most significant obstacle to developing LNG for export. In Yemen, costly transportation of natural gas from the country's rugged interior, combined with additional security measures, increases production costs. In 2002, in order to encourage investment in commercial natural gas development, the country began offering 25-year purchase price agreements that lowered the price of natural gas to $0.50 per million Btu. Facing slow progress in export-oriented production, it is now considering developing natural gas for domestic electricity generation and petrochemical production. In March 2005, Denmark’s Ramboil signed a feasibility contract to build a natural gas pipeline that would link the Marib fields to the towns of Aden and Hadeeda. The plan is to build three power plants that would be fuelled with the natural gas resource obtained.
Yemen is the least electrified country in the region with only about 42% of the total population having access to electricity. In the rural areas, the electrification rate is even lower at about only 20%. Power generating plants need overhauling, while the transmission and distribution networks all require considerable upgrade and investment.
The aim in the power sector is to raise the share of the population that has access to electricity. It is envisaged that the government role will become a regulator and policy maker with the private sector increasingly taking the lead in operations in power generation, transmission and distribution through the use of management and operating contracts or partnership contracts.
Yemen plans major investment in the Aden Container Terminal (ACT) and Aden Free Zone with major projects planned for the area including a heavy industry and petrochemical zone – where a fertiliser project is under study – and an air freight and cargo village. Furthermore, Yemen is planning wider expansion of its ports infrastructure and aims to expand the number of commercial ports from six to nine by 2010, with new facilities planned at Socotra island, Kalfoot in Maharah and Dhuba in Mukhallah. Details of these projects were contained in the country’s public investment plan for the years for 2007-2010 which was unveiled at an international donors conference held in London in late November 2006, which secured pledges of $4.7 billion.
Agriculture in Yemen has a substantive potential for growth and development. Together with fisheries, the sector accounts for only 15% of GDP but employs 55% of the active population. The low productivity of the sector stems mainly from factors such as low yield of the seed varieties, water shortages, lack of rural roads and access to markets, and lack of credit to producers.
The fisheries sector is the country’s most important revenue generator after oil and there is growing concern about the lack of control of foreign fleets which may deplete the vast fish stock around the country’s extensive 1,906km coastline. It has significant growth potential given an adequate allocation of resources, when it could be expected to grow at an average of 12% to 2010. Production is expected to reach 240,000 tons with an export value of $1.4 billion by 2015.
Water sustainable management is one of the highest concerns for the medium to long term development perspectives of the country. Urban and rural water supply capacity in Yemen is not keeping pace with population growth. Groundwater extraction has reached 130% of recharge capacity with agriculture accounting for about 85% of demand. A strategic investment plan for the national water sector was launched in 2004 supported the World Bank and international donors. Adequate water supplies at that time were available to only 32% of the rural and 54% of the urban population, while the sanitation was available to only 23% and 26%, respectively. Significant investment is clearly required.
Yemen, which is one of the oldest centres of civilization in the world, has many remarkable features making its tourism potential considerable. Its many attractive features include historical sites, traditional cities and the mountain top villages. There are cities composed by clay buildings some of which are ten floors in height such as Shebam Hadramaut which is called the “Desert Manhattan”.
The capital Sana’a is often described as resembling an open museum with a unique architectural style that puts it in a class of its own among the oldest cities of the world. Yemen also possesses long beaches on the Red Sea in the west, the Gulf and the Indian Ocean in the south. Its desert areas include beautiful dunes which provide an unforgettable experience by visitors. In 2005 284,221 people visited Yemen.
To achieve universal primary education by 2015 is one of Yemen’s priorities. The number of students completing secondary and tertiary studies is expected to increase significantly with improved infrastructure and teaching methods. The priorities for investment in the education sector include classroom construction; teacher training; improvement in the quality of education, through introduction of IT and English language courses.
Quelle: Ghorfa, Arab-German Chamber of Commerce and Industry e.V.
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