Analysis: Yemen’s Energy Future Unclear

Analysis: Yemen’s Energy Future Unclear

Derek Sands
SOURCEUnited Press International
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As Yemen reaches out to foreign companies to invest in its oil and natural gas development, the country faces an on-and-off Shiite insurgency, an ongoing al-Qaeda threat and a populace sympathetic to jihadist militants.

Yemen already hosts Canadian, Chinese, U.S., Korean and French energy companies, and in April, Yemen’s Minister of Oil and Minerals Khaled Bahah made a trip to Calgary, Canada, in an effort to attract more foreign interest in exploring for oil and natural gas in the country before another round of bidding for offshore blocks begins.

In July, after meetings with energy industry delegations from France and Spain, Bahah announced a conference to discuss investment in Yemen’s oil and gas would take place “soon,” according to the state-run Yemen news agency, Saba.

Yemen’s government estimates that the country holds around 9 billion barrels of oil in reserves, but industry reports place proven reserves at less than 4 billion barrels. It produces about 330,000 barrels a day and has seen production drop slowly since 2000, according to the Energy Information Administration, the data arm of the U.S. Department of Energy.

The country’s oil and natural gas deposits are largely unexplored, and many analysts are hopeful that Yemen could yield immense reserves, especially offshore. But aside from the usual difficulties associated with oil and gas exploration, investors in Yemen must tangle with the potential for al-Qaeda terrorist attacks, as well as a fragile cease-fire between the national government in Sanaa and the Shiite Zaydist al Houthi group in the North of the country.

Oil and natural gas revenues are crucial for Yemen, accounting for 70 percent of government income, according to the EIA, and energy facilities across the country have proven to be an attractive target for various factions at odds with the government.

Although official claims have not been confirmed, the government said that last week al-Qaeda attacked an oil tanker in Marib, about 150 kilometers east of Sanaa. This is near the site of a suicide bombing on July 2 that killed 10 Spanish tourists and two Yemenis, as well as an area that provides nearly a quarter of the country’s crude oil.

Attacks against the energy sector are not frequent, but when they do happen they can be devastating. In an echo of the October 2000 attack on the USS Cole in Aden, which killed 17 sailors, the French oil tanker Limburg was bombed by terrorists in October 2002 off the coast of Yemen, killing one and sending about 90,000 barrels of oil into the sea.

On land, the threat remains as well. In September 2006 four simultaneous suicide bombings of oil facilities in Marib and Hadramawt were foiled by Yemeni security forces. Al-Qaeda later claimed responsibility for the attempts.

Outside of the capital and some other key areas, government forces have little control of the Yemeni hinterlands, some of which may prove the most attractive to foreign oil investors.

“The other thing that you need to think about with Yemen is that radical Islam is the norm there. It is a very lawless place,” according to Jonathan Schanzer, the author of “Al Qaeda’s Armies” and a director at the Jewish Policy Center in Washington.

“I would say that the hearts and minds of the average Yemeni, I would say a larger than average percentage are with jihadists,” he said.

Complicating the situation is the suggestion by some analysts and Yemeni officials that Iran may be providing assistance to the Shiite al Houthi rebellion, which is currently abiding by a cease-fire but has been involved in bloody fighting with the government off and on for several years. Although the allegations of Iranian involvement are difficult to prove, they are not far-fetched.

“I would not know how to tell you to confirm it. Iran has certainly been behind a number of violent movements, and they have certainly sought to create instability in countries where you have Shiite and Sunni, as Yemen is,” Schanzer said.

“It would not be surprising at all to see Iran try to do something along the lines of what they have done in Lebanon to create conflict,” he said. Iran is widely thought to support the Lebanese religious party and guerrilla group Hezbollah with arms and training.

How Iran would back rebellious Shiite groups is unclear, but Schanzer, also a former analyst for the U.S. Treasury Department, explained that there are quite a few ways to move money into Yemen, including through banks.

“Yemen is not exactly the most sophisticated in its banking system, and I think there are probably a lot of loopholes or gaps that can be very easily exploited,” he said.

Funds are not the only way to lend support; there is a flourishing arms trade across Yemen’s borders as well.

“You also have to think about the incredibly wide open borders between Yemen and Saudi Arabia, unbelievably porous, and Yemen has done almost nothing to control that. And there would be very little to stop a smuggler from entering Yemen from Saudi Arabian territory,” Schanzer said.

(e-mail: energy@upi.com)

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