YEMEN - Mukalla Projects.

There are two oil refining projects proposed to be built near Mukalla, capital of Hadhramout, on the Gulf of Aden. In April 2002 President Saleh laid the foundation stone for the most advanced project, a plant being sited at the Hadhrami port city's Al Dhaba area to be built for private Saudi, Yemeni and UAE interests grouped under the Hadhramout Refinery Co. (HRC) The plant's initial capacity will be 40,000 b/d, and eventually this will be expanded to 100,000 b/d. plant's $200m engineering, procurement and construction (EPC) contract was awarded in May 2004 to a partnership of Samsung Corp. and SK Engineering & Construction of South Korea. It will be on stream in 2006. The project management consultant (PMC) is Technip of France.

Under a $1.2 bn contract signed with HRC in London on Aug. 17, 2003, Samsung will lift a total of 8.8m tons of diesel and fuel oil from the refinery over a 10-year period from 2006. In return, Samsung is providing a loan to finance the EPC contract. The crude oil will be provided by the state-owned YOG under a long-term contract based on a January 2002 agreement initialled between the oil ministry, represented by the Yemeni Oil Refinery Co., and Al Muttahida (united) Co. for Petroleum Investment - of which the HRC is an offshoot.

The HRC is an evolution of the Saudi-Yemeni Co. for Petroleum Investments (SYPI). Founded in mid-2001, SYPI is based in Dubai with offices in Saudi Arabia and Yemen. A key shareholder is Salim Ahmad Salim Bin Mahfouz, of a prominent Saudi banking clan which originates from Hadhramout. (But Nimir Petroleum, controlled by the Bin Mahfouz, had abandoned its E&P oil interests in Yemen and left the country in early 2001 - see Gas Market Trends).

SYPI's Chairman and CEO is Dr. Khalid Abdel Ghani, who is also head and CEO of the HRC and Al Muttahida which was set up in mid-2001 by Saudi, Yemeni and UAE investors. SYPI's Executive Director is Dr. Mazin Ghalib Samman.

The second project for Mukalla has been promoted by local businessman Said Al Khorbach who in 1996 got a licence to build a refinery with a capacity of 100,000-125,000 b/d. However, this project has been in limbo since 1997. (Proposals for a refinery in Mukalla were first floated in late 1992. But the political leadership in Sanaa has not been keen on the project and since 1997 has declined Khorbach's request for the proposed Mukalla site of the refinery to become a free zone). In January 2001 it was reported that the government had awarded a licence to the local Al Kuthairi Group to have a 60,000 b/d refinery built in the Hadhramout province.