Hunt Oil continues good partnership with Yemen

by Jim Landers

The desert oil camp is ringed with watchtowers, tanks, artillery and missiles. An army crew drives around a drilling rig in a pickup truck with a large machine gun mounted in the bed. For 20 years, Yemen Hunt Oil has lifted oil out of the ground and turned it into wealth while leaving law and order to the Yemeni government.
"In my trips to Yemen, I make it very plain to my Yemeni host that my job is to produce oil and gas, while his job is to make me and my people safe, and we have no complaints," said Bill Lewis, vice president and general manager of Hunt Oil.

Yemen helped privately held Hunt Oil of Dallas double its revenue in the 1990s to more than $ 2 bn a year and become one of the largest independents in the oil business. And oil gave the Yemeni government a degree of financial independence, after decades of living on aid from Saudi Arabia and the earnings of expatriate workers.
The partnership is hoping for a repeat performance with natural gas. After seven yearsof coming up empty, Hunt has taken the lead in searching for a market for Yemen's gas.
"We hope with the help of Hunt guiding us in the US market -- and they are playing a good role in this regard -- we hope to announce positive results soon," said Taha Al-Ahdal, director general of the gas division of Yemen's Ministry of Oil and Minerals.

Hunt Consolidated, chaired and led by Ray L. Hunt, shifted several executives at Hunt Oil this month and named senior vice president Tom Meurer president of Yemen LNG Meurer has been working with the company's natural gas operations in Peru.
Hunt Oil recently completed construction of a gas pipeline from the Camisea field in the Andes highlands down to Lima. The company is contemplating construction of a gas liquefaction plant on the Pacific coast to ship LNG to a Mexican terminal in Baja California, where it could be used as a power plant fuel both for local needs and to export electricity to California. LNG from Yemen would ideally head to markets in Asia, but it could be shipped across the Pacific or the Atlantic.
"We've got the gas, and we're ready to go," Mr Meuer said. "The problem is finding a contract so we can get the financing to go ahead with the project."

The fields clustered around Marib have yielded more than 1 bn barrels of oil since Hunt struck oil here on July 4, 1984. Oil production has peaked, however, and is in a slow decline. The current average is 144,000 bpd. The company recently won a five-year extension to 2010 on its production-sharing agreement with the Yemeni government, which is expected to perk up investments in oil exploration.
Oil production in southern Yemen has surpassed the Marib fields. Overall, Yemen is producing roughly 450,000 bpd, which accounts for 70 % of government revenue. The southern fields are declining as well, however, and Yemen is scrambling to attract investors to keep its oil earnings from sliding.

Throughout the Marib oil fields, there are large deposits of natural gas. Yemen Hunt Oil lifts more than 3 bn cfpd of gas from the Marib region, strips out 22,000 barrels of liquids to add to its crude oil and then pumps the gas back into the ground, waiting for a buyer.
So far, there are no takers. Shipping gas to global customers is a capital-intensive process that involves titanic chillers churning out LNG that can be poured into the hulls of refrigerated supertankers.
Qatar, a small Persian Gulf country, has far more gas than Yemen (more than 1,000 tcf, compared with Yemen's 16 tn). And Qatar's reserves are beneath the sea, while Yemen's are locked in an inland desert, with two mountain ranges separating it from the Red Sea coast.

The Yemen LNG project, led by the French oil company Total, will require an estimated $ 2.5 bn for pipelines and treatment plants. Deliveries would not begin until 38 months after sales contracts are signed. Meanwhile, Qatar is selling gas worldwide and pouring large sums into added capacity.
Mr Al-Ahdal said the Yemeni government has discussed competition with Qatarand won assurances from the Qatari government that its companies would not compete against Yemen on an Indian request for bids on supplies of LNG. But Qatar is well ahead of Yemen in its plans to ship LNG to the United States.

Then there are those security issues. President Ali Abdullah Salih brought the Marib tribes together recently and hammered out a 30-month truce in revenge killings. The CIA took out six al-Qaeda militants near here in November 2002 with a rocket fired from a Predator drone.
Yemen Hunt Oil workers fly to the Marib fields from the Yemeni capital San'a -- a distance of about 110 miles -- while everyone else travelling between the two cities goes in a convoy with military escorts.

Yemeni officials insist security is better than it sounds, and Hunt has seen worse times in its 20 years in Yemen. The Marib oil facilities were bombed during a brief 1994 civil war. One bomb dropped from a jet flown by a Bulgarian mercenary pilot skipped off a guardrail just in front of the oil pipelineand exploded in a warehouse.
"There are probably a few al-Qaeda sympathizers in the area, not a lot," Mr Lewis said. "The government has done a wonderful job of controlling, eliminating and capturing these people."

ExxonMobil is a partner in Yemen Hunt Oil Co. and was involved with Yemen LNG Co. as well. But ExxonMobil withdrew from Yemen LNG in June 2002 and has since committed to build Texas terminals near Ingleside and Port Arthur to receive Qatari LNG. Hunt stayed with Yemen.
"That project has got some serious competition from Qatar," Mr Lewis said. "But we made a commitment to stay, with Total, mainly to show support for the Yemeni government."

The search for customers began in Asia in 1997. The Asian financial crisis flared up that year, scorching potential buyers such as South Korea, Taiwan and Japan. Two Korean conglomerates -- Hyundai and SK Corp. -- hold shares in Yemen LNG but have not been able to bring in Korean customers.
India seemed a good prospect, but the collapse of Enron took down a promising lead for gas deliveries to the Dabhol power plant. Yemen is waiting to hear from India about its bid on another supply contract.
China's great appetite for energy offers hope for Yemeni exports, but the first contracts there went to gas producers in Trinidad. Total has been unable to score a customer for Yemeni gas in Europe in the face of competition from Algeria and Nigeria.

So, with Hunt's assistance, Yemen is looking to the United States. LNG currently accounts for less than 2 % of US gas supplies, and most of that comes from Trinidad. There are gasification terminals in Massachusetts, Maryland, Georgia and Louisiana. More than a dozen others are in the planning stages. By 2020, Cambridge Energy Research Associates chairman Dan Yergin projects, LNG could account for as much as 30 % of US natural gas supplies.
"We are uneasy that we have not been able to capture a market since 1997," said Mr Al-Ahdal. "We are optimistic, with the help of Hunt, we will find one."

A gas industry would buy time for Yemen to build an economy that could spread into new areas such as fishing, food processing and tourism, and give the government more tools to cope with a fast-growing tribal population.
"We appreciate what Hunt has done for Yemen," Mr Al-Ahdal said. "Even during the [1994] internal security crisis, they continued here. And they were the first company to discover oil in Yemen."