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Yemen Country Analysis Brief - September 2013

Overview

Although Yemen is not a major hydrocarbon producer relative to some of the other countries in the Middle East, oil and natural gas resources are sufficient to enable exports. However, Yemen's difficult security environment hinders the production and transport of those resources.

Yemen's energy sector is in a state of flux. Declining oil production and frequent attacks on Yemen's energy infrastructure have offset positive developments in the country's natural gas sector since 2009. Yemen's difficult security environment complicates the exploration, production, and transport of energy resources in the country, and could undermine the country's emerging liquefied natural gas (LNG) export sector.

Yemen is not a major energy producer compared with other countries in the Middle East. Yemen's crude oil production has never ranked in the top-30 globally, and the country used all of its natural gas production to aid in oil recovery until 2009. Nevertheless, the country's location at the Bab el-Mandab, a key chokepoint in international shipping, makes it important in terms of international energy trade. More than 3.4 million barrels of oil per day (bbl/d) pass through Bab el-Mandab, and closure of the two-mile strait would force tankers to sail around the southern tip of Africa to reach European and North and South American markets.

Yemen is highly dependent on its hydrocarbons sector. Even with the earnings from natural gas exports, the International Monetary Fund (IMF) estimates that Yemen needs an oil export price of approximately $215 per barrel to balance its budget. IMF figures also show that nearly 60% of government revenues came from the hydrocarbons sector between 2010 and 2012. Yemen, as a member of the Extractive Industries Transparency Initiative (EITI), reported in July 2013 that government revenues from the oil and gas sector in 2010 were more than $5 billion. IMF estimates indicate that in 2012 oil exports accounted for approximately 70 percent of hydrocarbon revenue, while natural gas exports accounted for just 3 percent.

Oil production in Yemen declined steadily after peaking in 2001, but beginning in 2009 the country began producing commercial quantities of natural gas for domestic use and for exports as LNG. This latter point could help the country stabilize its economy even without an extremely high oil export price. However, replacing oil export revenues with LNG export revenues does little to help the country reduce its dependence on its hydrocarbons sector.

For the full report, visit: http://www.eia.gov/countries/cab.cfm?fips=YM.

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