The Oil Sector

Promising Oil and Minerals Future

The oil sector would always remain the basic source of income and revenues for the Yemeni economy because it generates numerous investment opportunities. Yemen being a virgin land, all of its diverse and various potential wealth is a sign of a very promising future.

Actually, wide oil explorations took place over the last period of time in Yemen as a result of flow of many international oil companies (IOCs) to operate in the Yemeni oil industry. Despite the big flow of IOCS, oil operations are only conducted on a very small part of Yemen's concession areas.

Yet, with new oil discoveries, exploration activities increased and fostered more to create a significant development in infrastructure.

Furthermore, there are many open blocks showing good omens for further oil discoveries. This is so for only 80% of the areas allocated for oil exploration have not yet been discovered. Besides the oil sector, there are possible opportunities in gas and minerals.

A brief breakdown of the oil, gas, and minerals activities is as follows: 

-         Until December 2006, the total number of oil blocks is 87; out of which only 12 produce oil and another 26 are under exploration.

-         The number of oil companies is 28; 12 of which are producing oil and 16 are exploring for oil.

-         Since the discovery of oil in Yemen until now, 83 PSA's have been signed.

-         The number of drilled oil wells is estimated at 1824.

-         Seismic surveys were as follows:

·        2D surveys were done on an area of 170.764 km;

·        3D seismic surveys were conducted on 6071 km.  

-           Exploration has been done by 57 IOCs on 39 blocks since the discovery of oil in Yemen.

-         At present there are 51 blocks having the potentials to produce oil.

-         There are 12 blocks which are actually producing oil.

-         The oil in place in the producing blocks amount to 9.7 billion barrels.

-         2.3 billion barrels have already been produced.

-         Total gas reserves discovered in the producing blocks account for 16.3 trillion cubic feet.

-         There are 83 LPG plants.

-         By the end of 2006 , LPG consumption increased by 705.403 metric tons.

-         Production of LNG would start at the end of 2008.

-         Gold was discovered in Wadi Miden, Almukalla, Hadhramout,  which is one of the typical and unique gold locations in Yemen.

-         There 891 sites containing constructional and decorative rocks.

-         There are 10 companies doing minerals exploration and extraction.

-         Many surveys were conducted on minerals in Yemen;

-         A contract for zinc, lead and silver exploitation was signed with ZincOx to inaugurate the first mine in Yemen.

Oil and Gas Investment Opportunities

Erection of New Refineries:

Purpose of the project:

The intention is to erect new refineries with the aim of exporting oil products of a high competitive value to overseas markets and, if necessary, meeting the needs of the local market. 

Annual Production Capacity: 100 thousand barrels/day of exports.

Proposed Site(s): Coastlines of the Arab and Red seas.

Estimated Investment Cost: US $700 million

Targeted Market(s): Local and Overseas markets

The rationale of the projects is to:  

-         Encourage and erect new refineries in order to avail or import crude oil so as to make use of Yemen's location in constructing refineries; this is for the sake of meeting the needs of overseas and local markets, especially in respect of producing oil derivatives of high international specifications. More importantly is to avoid monopolization;

-         Foster and encourage competition among investors to ensure the delivery of high quality services and products with lower costs and in order to protect the environment; and

-         Provide refineries with crude oil, as accessible–provided that a refinery should not depend on one source in its operations.   

Updating and Upgrading Aden Refineries

Project Purpose:

To update and upgrade Aden Refineries;

Production Capacity: 150,000 barrels/day;

Raw Materials Source: Ma'reb and Al-Masila crude oil; any other non-local oils;

Manpower: available in the refineries and of different specializations;

Estimated Cost: US$ 500 million;

Project Aims:

The intention is to:

-         upgrade the refineries to be able to absorb any type of oil;

-         Raise the production capacity

-         Generate products of international specifications; and

-         Meet the oil requirements of local and overseas markets.

Oil and Gas Exploration Opportunities 

Yemen has a great deal of oil concession areas in the midst and eastern parts of the country. There are also large areas in the deep-seas, located in Aden Gulf, the Red Sea and Suqtra Island. Yemen's current oil production is estimated at about 350 thousand barrels/day. There are 26 oil companies doing a lot of exploration and production activities. It is expected that the number of companies would rise to 30 IOC's after the legal approval of the second and third international competitive bids which announced in 2005 and 2006, respectively.

By scrutinizing the Yemeni oil map, it would be clear that oil operations are in 12 blocks only, an area which represents a percentage of not more than 4% out of the total open blocks. Reliable information have shown that there are various promising concession areas in 12 sedimentary basins and that oil is being produced from two basins only, a fact which is highly optimistic and promising to Yemen and interested oil companies.

Accordingly, investment opportunities in oil and gas exploration and production are numerous. Some of which are as follows:

A: The Ministry of Oil and Minerals (MOM) represented by the petroleum Exploration and Production Authority (PEPA) is preparing and drafting the fourth international competitive bidding. By the second half of 2007, the MOM is going to announce the invitation to bid regarding offshore Blocks. Such bids have a time-limit and follow the principle of competition among interested and specialized oil companies and the factors for granting oil concession rights in respective offshore blocks. Details of invitations to bid would are available in the oil ministry's website. 

Linear Alkyl-Benzene Project

Purpose: Production of unprocessed materials used in detergent manufacturing;

Production Capacity: 50,0000 tons/year, distributed in three work shifts (8 hours a day, 320 days a year); 

Raw materials: Kerosene and gasoline offered by Aden Refineries

Manpower: available locally with suitable wages; also engineers and specialists are available in refining industry; it is possible to seek the assistance of foreign experts if necessary

Estimated Investment Cost: US $180 million

 Targeted Markets: local and overseas markets

Site: the Free Zone, adjacent to Aden Refineries because of accessibility of raw materials and services and transportation

Aims of the Project:

The intention is to

1.     Avail raw materials for detergents manufacturing instead of importing them with millions of dollars.

2.     Cope with the advancement and progress in oil industry and petrochemicals by adopting this type of technology and thus rely on our potentials and skills in this respect; and

3.     Avail raw material for this industry especially kerosene whose consumption declined because of gas and electricity.

Note: There is an initial study on local markets and transformational factories.

Expansion of Ma'reb Refinery

Purpose:

To increase the existing refinery's production of petroleum derivatives such as (gasoline, kerosene, diesel and gas oil or fuel oil) in addition to the production of LPG;

Production Capacity:

By installing additional refining units with production capacity of 15,000 barrels/day to the existing ones, total production capacity would be 25,000 barrels/day as the current capacity is 10,000 barrels/day from Ma'reb/Jawaf fields with an API gravity of 42-45.

Manpower:

Locally available with high international competence in refining engineering and petrochemicals; seeking foreign expertise could possibly be managed.

Estimated Cost: 

The total cost of the project along with the upgrading of refining units is estimated at $70 million.

Targeted Markets:

Local markets in Ma'reb, Jawaf, Sana'a and A'mran.

Project Site:

Ma'reb (Safer) besides the existing refining plants and the Safer's CPU of raw oil

Project Aims:

The goal is

1.     To meet the growing need of oil derivatives in the local market.

2.     Instead of importing oil derivatives, produce them locally by using accessible Yemeni oil

Opportunities in Oil Services

There are numerous opportunities in oil services: drilling; construction of oil plants; conducting of surveys, etc. This is via establishing national oil companies or private-local-based firms capable of competing with foreign enterprises. In so doing, the invested capitals in oil and gas would be utilized and Yemeni cadre would be recruited in these fields