Yemen Liquefied Natural Gas (YLNG) Company is still producing its quota of two containers a week of gas for shipment, despite the loss of oil production from the Marib fields in the centre of the country.
Oil exports from the fields have been locked in due to a pipeline attack in mid-March and the country is now running low on foreign currency reserves to pay for imports, say sources in Yemen.
YLNG is still running because it is re-injecting oil into the fields and running the 10,000-barrel-a-day (b/d) Marib refinery flat out, says a source close to the company.
The refinery is operated by Yemen Hunt Oil Company. The US’ Hunt Oil also owns a 17.22 per cent stake in YLNG.
Associated gas produced with oil at 14 fields in the Marib area fields are passed through two gas processing centres with a combined capacity of 1.8 billion cubic feet a day (cf/d) removing condensates and liquefied petroleum gas (LPG).
Yemen LNG recovers the associated lean gas, before liquefaction and export, while the remainder is re-injected into the reservoirs to boost oil production.
“This enables them to process enough gas for YLNG. Normally they re-inject gas to push the oil out, but now they are reversing the process. YLNG normally gets its feed by splitting the re-inject stream”, says a source close to the company.
“YLNG is producing at nominal rates with all its staff present at all its sites,” says Francois Rafin, YLNG’s general manager director.
However, while this process can be used for a while, “it is risky and in the long term unsustainable, as it reduces the reservoir pressure and is very inefficient”, says a London-based analyst.
The Marib export pipeline runs from fields in Block 18 to the port of Ras Issa on the Red Sea. Most of the sweet light crude produced is exported by state-owned Safer. The revenues are then used to buy heavier crudes, particularly from Iran for the 130,000 b/d Aden refinery.
On 8 June, Saudi Arabia pledged to supply about 3 million barrels of oil to Yemen over June. This would be sent to the Aden refinery. The country consumes about 130,000-160,000 b/d of oil equivalent, with diesel generating much of its power plants and the water pumps, which are crucial to keeping the country active. However, the Marib pipeline was attacked in mid-March, cutting off exports.
“The attack on the Marib pipeline has cut off this revenue, so they can’t afford the oil for Aden, and the central bank is not willing to kill its [foreign currency] reserves to stump up the difference”, says the source.
“The central Bank Governor is down to his last $2bn and refuses to play ball,” says a source in Yemen.
With letters of credit only being provided for crucial food supplies, traders are asking the government to pay in cash, which it is unable to do. The result has been a build up of more than 70,000 barrels of refined products at Aden, waiting to be offloaded pending pending payment.
According to the UK’s BP, Yemen produced 287,000 b/d of oil in 2010. While other producing fields are reported to be running at low rates, they are not connected to any domestic refineries, so will not provide any relief.