YEMEN - Part 1 - The Prospects & Geology.

Yemen, a source of high quality oil, has increased its production capacity from 388,000 b/d in mid-1998 to more than 441,000 b/d. The capacity is not likely to reach the one million b/d figure projected in the 1980s by some of Sanaa's leaders.

The bulk of Yemen's oil production is exported. Domestic oil consumption is to remain limited to about 70.000-75,000 b/d in the near future (see Downstream Trends).

The increase in production has come from two new E&P areas: the Jannah block operated for Hunt on behalf of an international consortium, where the output has risen from 25,000 b/d to 65,000 b/d; and the East Shabwa block, operated by Total of France, where production has increased from 20,000 b/d to 40,000 b/d (see profiles of fields & operators in Part 2).

Officials in charge of oil marketing and export pricing continue to face problems with term clients. For its part, TotalFinaElf is still trying hard to find credible buyers of liquefied natural gas in order to proceed with its 5.3 million tons/year LNG export venture. A final decision on this project should be taken before end-2000 (see Part 3).

The territorial dispute between Yemen and Saudi Arabia is finally being resolved through a comprehensive agreement negotiated bilaterally. This follows a landmark visit to Sanaa by Saudi Crown Prince and acting ruler Abdullah Ibn Abdel Aziz who attended the May 22 celebrations marking the national day and the 10th anniversary of Yemen's unification. President Ali Saleh visit to Saudi Arabia in June was to be followed by a further improvement in relations. As a result, foreign oil companies are more optimistic about Yemen's E&P prospects (see Gas Market Trends).

President Saleh and his government have improved Yemen's image following a north-south war in 1994 which devastated the economy but helped the country's re-unification. The president is personally keen on seeing Yemen's hydrocarbon potentials developed and makes it a point of meeting executives from key foreign oil companies. He personally approves E&P deals (see who's who in Downstream Trends No. 26).