South Korea’s Shinhan Engineering & Construction has won a $350m deal to expand the Marib refinery complex in northern Yemen.

Shinhan signed the contract with the Yemeni Oil & Minerals Ministry and reported it to the Korea Stock Exchange on 23 November, says one executive close to the deal.

The state-run Yemen Oil Refining Company (Yorco) will oversee the scheme. Under the deal, Shinhan will expand the capacity of the refinery complex from current levels of 10,000 barrels a day (b/d) to 25,000 b/d.

The scope of works includes the construction of a catalytic cracker to break crude oil down into lighter products; a sulphur recovery unit to separate the environmentally harmful chemicals from petroleum; and the offsites and utilities which will support the development.

Shinhan will operate the expanded refinery for 12 years once it begins commercial production in the fourth quarter of 2012.

The development is part of a wider Yorco scheme to boost the country’s refining capacity as the government fights to combat a major shortage of locally produced fuel in the Arab world’s poorest country.

Although Yemen produced 305,000 b/d of crude oil in 2008, its refining capacity was little more than 100,000 b/d, which analysts say is not enough to provide petrol and fuel gas to the country’s 23 million population.

According to UK think-tank Chatham House, Sanaa spent 23 per cent of its 2008 revenues on subsidising imported fuel in a year when it ran an 11 per cent budget deficit.