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News Analysis: Yemen oil, gas sector needs suitable remedies

(Xinhua)

08:24, May 14, 2012

SANAA, May 13 (Xinhua) -- Yemen has launched efforts to develop the oil and gas sector, which is considered as the backbone of the national economy after the 2011 unrest deepened the country's woes.

Within the efforts, the government has been meeting with oil and gas companies to urge their concessions and an increase in oil and gas production to boost the economy. Preparations have also been underway to hold meetings to promote investment for Russian, British, U.S. and Indian oil and gas firms this year.

When it took office in December, the power-sharing government revealed plans to develop the oil and gas exploration and production operations to attract new investors. In its program which was approved by the parliament, the government focused on expanding the gas production to bring in more revenues and to generate electricity.

Yemen is a small oil and gas producer at the moment, but its oil ministry has said about 85 percent of the country's land has not been explored, and, with 12 basins, it currently produces oil and gas only from two -- the Marib-Shabwa and Masila basins.

The oil ministry also revealed recently that there are 12 producing blocks, 31 exploratory blocks and 60 blocks open for investment.

Oil revenues make up more than 70 percent of the state budget, and oil and gas products account for more than 90 percent of the country's exports. In addition, it has the Balhaf LNG project which produces and exports 6.7 million metric tonnes a year.

Despite the current challenges, developing the oil and gas sector, especially increasing production, is not impossible, with officials and experts saying that the situation just requires suitable remedies; immediate robust reforms and strict measures by the government.

According to an official at the petroleum exploration and production authority(PEPA), some companies can increase production since their studies have indicated to the possibility.

Economists said the plans to develop the oil and gas sector are good but all remedies should live up to the challenges affecting the national economy as Yemen needs a long time to develop the non- oil sectors.

More recently, reports including official and World Bank ones have warned of the depletion of the current oil reserves in almost a decade and the impact of the security on attracting more investors to the Yemeni oil and gas sector.

The oil ministry responded by saying that the reports warning of oil depletion were untrue because studies have indicated large oil and gas potential in Yemen, which is yet to be discovered and used. Some of the studies estimated the oil reserves at more than 9.1 billion barrels and the gas reserves at more than 18 trillion cubic feet (about 510 billion cubic meters).

Yemen's oil production rapidly declined from more than 400,000 barrels per day at the beginning of the past decade to the current 270,000 barrels per day.

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