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    Optimism about Yemen LNG as ceasefire holds, for now [Gas In Transition]


The relative success to-date of a UN-brokered ceasefire has led to hopes Yemen LNG and other assets could resume operations by the end of the year. [Gas in Transition, Volume 2, Issue 5]

by: Ian Simm

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Complimentary, Natural Gas & LNG News, Middle East, Insights, Premium, Gas In Transition Articles, Vol 2, Issue 5, Political, Saudi Arabia, Yemen

Optimism about Yemen LNG as ceasefire holds, for now [Gas In Transition]

A ceasefire brokered by the UN has brought a welcome pause to more than a decade of civil conflict, and while there is uncertainty about what comes next, optimism about Yemen’s energy sector is returning. The agreement was signed between Yemen’s Iran-backed Houthi militia and Saudi Arabia, which has propped up its own government, setting up a provisional capital in Aden.

While the two-month truce is reason for celebration – particularly given that it has lasted more than a month already – extending this into something more permanent is almost certain to prove more challenging.


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However, unlike in Syria, where sanctions on economic activity brought about an exodus of international oil companies, those operating in Yemen have retained concessions, resuming work in fits and starts.


Yemen holds around 3bn barrels of oil and 17 trillion ft3 (481bn m3) of gas. Oil production peaked at 441,000 b/day in 2001, but fell to just 16,000 b/d in 2018. This has rebounded to roughly 55,000-60,000 b/d and the peace deal has commentators speculating that output could increase much more rapidly. Gas figures are less clear, however, Patrick Pouyanne, CEO of France’s TotalEnergies, said recently that the 7mn metric tons/year Yemen LNG plant could resume operations by the end of the year.

The plant, located at Balhaf on the Gulf of Aden coast of the Shabwa Governorate is operated by a joint venture comprising the French firm (39.6%), American company Hunt Oil (17.2%), SK Innovation, Hyundai and Korea Gas Corp. (KOGAS, 21.4% combined) the local Yemen Gas Corp. (YGC) and GASSP (21.7% combined) and has been under force majeure since 2015. It is fed by a pipeline which runs from the Marib-Jawf concession (Block 18) in the Ma’rib Governorate and runs through Shabwa to the east. Gas from the block – mainly associated with oil production – continues to be reinjected to maintain reservoir pressure.

The resource-rich provinces of Ma’rib and Shabwa have been the key battleground for recent fighting with UAE-backed forces pushing the Houthis back from the latter in January and bringing the area’s oil and gas assets under Aden’s control.

During a Q1 earnings call, Pouyanne said: “According to our assumptions, it could take six months to restart the plant. So, this 7mn mt/yr might be available quite quickly. But it’s conditional on the ceasefire,” he said, adding that the facility had been “preserved”.

The executive noted that the facility was “very material” with annual cash flows of around $1bn. “It could easily replace part of the cash flows from Russia, but let’s see,” he said.

The plant’s supply line has been taken offline on several occasions, the latest of which saw it damaged in 2019. Despite this, the French firm has said that the terminal remains in “good condition”.

According to TotalEnergies, the Yemeni government in April 2017 “requisitioned some of the Balhaf facilities, which were de facto unused, for the coalition forces supporting the government”. NGW understands that the facility has been used as a military base by Emirati forces, which has caused friction with the local Shabwa administration, which is aligned with the Muslim Brotherhood, a group given a terrorist designation by the UAE in 2014.


While matters on the ground have been fluid throughout the decade of conflict, despite being controversial, Yemen’s leadership had until recently been stable. President Abd-Rabbu Mansour Hadi was appointed in 2012 and was originally intended to serve for two years as part of a transition to a wider democratic model for Yemen. That transition was never realised and Saudi Arabia has finally lost patience, pushing Hadi, who had been ruling from Riyadh throughout his reign, to resign just days after the ceasefire was announced.

During his reign, Yemenis heard little from the former president who let Saudi forces tackle the Houthis on his behalf. Having passed control to a council of eight representatives of Yemeni groups, the previously internationally recognised leader of the country is understood to be largely under house arrest in Riyadh. The council of leaders – fronted by Rashad al-Alimi who served both Hadi and his predecessor Ali Abdullah Saleh and has close ties with Saudi Arabia as well as Yemeni groups including the Muslim Brotherhood’s local affiliate, Islah. The council’s other members all swing military and/or political influence on the ground.

Hopes for a swift agreement with the Houthis were immediately dashed when the militants rejected the group’s legitimacy.

It remains to be seen whether the new administration will give the Houthis a seat at the negotiating table and there is no guarantee that the group would take up the offer in any case.

Houthi spokesperson and chief negotiator Mohammed Abdulsalam said: “The future and present of Yemen are decided inside Yemen, and any activity outside Yemen’s border is a skit and entertainment games played by the countries of aggression.”

The challenges lying ahead were highlighted this week by claims by the new government that the Houthis had carried out a sniper operation in Ma’rib, the latest in a series of violations of the ceasefire.

However, with three fuel tankers have been granted access to the Red Sea port of Hodeidah to deliver LPG and diesel following weeks of delays and the first commercial flight from Yemen for six years taking off this week, heading for Jordan, there is at least room for some optimism that some normalcy is returning.

This will obviously be big news for the country’s oil and gas sector, particularly as it has broadly shown resilience to maintain at least partial productivity in spite of a decade of major challenges.