The MOM, representing the Government of Yemen, markets the Yemeni crude oil (the government’s share). In doing so, the MOM conducts two channels. One is the principles and standards followed in petroleum industry. The other is through competition, that is, announcement is made to sell oil to about 40 qualified international companies which present their sale proposals. Then the highest bid is approved by the Higher Ministerial Committee for Crude Oil Marketing (whose members are the MOM Minister, Minister of Finance, Central Bank’s Chairman, Minister of Commerce, GM of the oil Authority, and GM of the Crude Oil Marketing Administration).  Contracts are then made according to the acceptance of the winning company of the sale price approved and announced by the Committee.

In addition, the Committee is also responsible for selling the government’s oil share to domestic refineries and world markets on the basis of FOB prices. It deals with the best specialized international companies in this respect in order to obtain a good status and reputation in the world oil markets. As result of following such procedures, there has never been any breach of any contract or agreement by any company with respect to loading operations and payment of dues since the beginning of oil exporting. Concerning the shares of oil companies (shareholders) working in oil production, these companies market and sell their own shares as dictated by the Production Sharing Agreement(s) (PSA) drafted between Yemen and respective companies. To meet the nature of the shipments and regulations of respective sea ports, Oil tankers are given dates at an early time to ensure that they are loaded on time. Furthermore, while any oil tanker should not have been in service for more than 20 years, double-walled tankers are encouraged to ship gas and given priority in this respect.

· Ra’ess Issa Oil Port

A Japanese-made port, it is a floating tank or giant ship of a ULCC type having a storage capacity of 409 thousand metrical tons. Through this channel, Ma’reb light crude oil is exported to international markets and Aden Refineries.

· Al-Shaher International Port

Constructed in 1993, this port is located at Al-Thabah area on the Arab Sea. Being about 38 km away from al-Shaher at the eastern part of Al-Mukalla, it is about 425 km away from Aden. Al-Masilah crude oil is shipped through this port to international companies.

· Radhoum Port

Its construction was completed in 1990;   located at the southern coast of the Republic of Yemen, particularly, at Beir Ali between Aden and Al-Mukalla, it is used for exporting South Iyad oil.

Procedures

There are number of procedures in marketing processes. Most include the following:

1.    an offer for sale is advertised to all qualified international oil companies ( about 40 companies);

2.    on a specific date, acceptances are received from all applicants;

3.    The concerned staff forwards the received offers-to-purchase or biddings to the Higher Ministerial Committee including the best bids and average prices. All of that is accompanied by an analytical report made by the crude oil marketing administration showing the current and future status of the oil markets at that specific period of time.

4.    The committee studies the offers and oil markets reports and then decides at what price it should sell the oil for a defined sale-period; following that,  commercial contracts are made according to existing policies of dealings with international companies;

5.    A common shipment program incorporating all shareholders in production blocks should be then accomplished. This includes the Ma’reb crude oil shipment program to Ra’ess Issa port at the Red sea; Masilah crude oil shipment program to Al-Shaher port at the Arab Sea.

6.    In coordination with the Yemeni Central Bank, being the sole bank in these matters, it shall be accountable to ensure that the oil buyer has presented all required securities and dues through international banks. Following that, the crude oil marketing administration gives its orders to the shipment port to carry out shipment operations of the sold government’s share.

Dealings with international oil companies, the purchasers of Yemeni oil, relies on accredited securities issued by first 30 recognized banks in the world and are approved by the Central Bank of Yemen.

As soon as shipment is done and the commercial invoice is drafted according to the binding commercial contract, all relevant documents are handed through a chain of respective banks, that is, starting from the Central Bank of Yemen to the bank of oil buyer(s).

All oil revenues as part of the general treasury are directly transferred/deposited to the Government’s general account under the name of the Ministry of Finance, subtitled Crude Oil Revenues.

Official sale-prices of Yemeni oil used to be made every three months. Yet, in 1998 this policy was changed to be every single month because of the instability of oil prices in world oil markets.

The equation/method of pricing Yemeni crude oil (Masilah or Ma’reb oil) relies on the prices exposed by Brent blend price indicators. That is, Official prices of the oil are defined on the basis of a differential (either premium or discount) to Brent at a given date and time. The method of pricing usually consists of four basic elements:

1.    Sale point;

2.    Pricing indicator;

3.    Adjustment factor which means either premium or discount from the pricing indicator, which rely on the type of the priced crude oil; that is, quality, sulfur quantity and location.

Timing mechanism conditioning the way of calculating this methodology or equation; the basis for pricing relies on taking the average rate of five days’ pricing following the shipment date of Brent blend crude oil; such prices are broadcast every day on the international Blats news. As such, the Official Sale Price (OSP) is either more or less than the Brent prices for that specific month with respect to the crude oil of Ma’reb ( light) or Masilah.