YEMEN - LNG Marketing.

In a presentation to the 2nd Yemen oil & gas conference held in Sanaa on June 24-25, 2002, Taha Al Ahdal, who is director general of the gas division at the oil ministry and a member of YLNG's board, said "the natural market" for this venture was India "due to the short shipping distance, generally less than 1500 nautical miles". He said the project had the full support of the Yemeni government and was vital to the economy of the country.

Al Ahdal said Yemen was also "well placed, due to its position outside the Gulf, to access Asian and European markets". He noted that YLNG was now holding discussions with a number of potential buyers.

For years having failed to secure firm buyers outside India, TotalFinaElf (TFE) is still counting on Indigas to take the output of the first train. Indigas is a partnership between its unit Total Gas & Power India, Tata Electric and Gas Authority of India (Gail), with each holding one-third.

Indigas is to have an LNG terminal built at Trombay, less than 100 km from Mumbai (Bombay) in the western state of Maharashtra, with a major gas-fired power plant is to be built as well. But the whole project has been on hold and it is doubtful that the first phase of the terminal, to have a capacity of 3m t/y, would start operations before 2005, when the power plant should start up as well. A firm 25-year take-or-pay contract is yet to be signed between Indigas and YLNG.

The second phase of the Indigas terminal should raise its capacity to about 6m t/y by 2008, or depending on how fast the Indian gas market will develop. However, TFE and its foreign partners in Yemen are insisting that, even if Indian gas demand grows as indicated, YLNG must diversify its markets. A TFE executive says YLNG prefers to have markets on both sides of Suez; but experts in the Yemeni government, including Premier Abdel Qader Bajammal, say LNG sales to Europe would generate about 40% less revenue than sales to India.

For the second train, TFE and British Gas International (BGI) have been negotiating a 25-year take-or-pay contract for BGI to purchase 2.65m t/y of LNG. YLNG and BG UK Holdings had signed a non-binding MoU for this in April 1998. It was agreed that the gas would be shipped to an LNG terminal to be built at Pipavav, on the Indian west coast in Gujarat state. The terminal is to be part of a JV between BGI and Gujarat Pipavav Port and would cost about $400m. BGI has a majority stake in Gujarat Gas Co., the biggest gas distributor in India, and is a 50-50 partner with GAIL in the Mahanagar Gas venture which is developing a gas network in Mumbai. BG has had a long experience in India.

The second phase of the Pipavav terminal is expected to raise its capacity to 5.3m t/y. If the YLNG-BGI deal materialises, this could enable YLNG to expand its capacity, even if TFE fails to secure additional buyers in other markets.

TFE in late February 2002 was among ten companies competing in bids to supply India's National Thermal Power Corp. (NTPC) with 5m t/y of LNG for four power plants in north-western and southern India

For years Total has been negotiating a 2.65m t/y deal with Korea Gas Corp (Kogas). Now TFE is among Western majors also involved negotiations to supply an LNG terminal to be built in China's booming business centre of Shenzhen, in the southern Guangdong province, where Woodside is a serious competitor for Australian LNG of NWS.

TFE is hoping to sell LNG to Turkey and to some of the major European gas consumers, with these markets to get the Yemeni gas by tankers sailing through the Suez Canal. It is trying to secure a firm contract with Gaz de France as the French market may require LNG in addition to contracted supplies from Algeria, Nigeria, Egypt and other sources.

An MoU signed on Dec. 12, 1996, by Botas and Total for the output of one train to be supplied to Turkey from 2001 expired at end-1997 with the Turkish company reluctant to revive negotiations. Botas has over-committed itself in deals for pipeline gas and LNG purchases (see survey of Turkey in Vol. 58, Nos. 20-23).

TFE in 2001 began brand LNG trading on the global scale. It bought three spot LNG cargoes from Nigeria, with two delivered to the Lake Charles terminal in Louisiana and one delivered to the Distrigaz terminal of Zeebrugge in Belgium