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Yemen to renegotiate LNG price with South Korea?

Oilfield Technology,

Yemen’s Foreign Minister Abu Bakr al-Qirbi, along with Minister of Oil and Minerals Ameer al-Aidarous, received the South Korean Ambassador on Tuesday to inform him that they wish to renegotiate the selling price of Yemeni LNG.

During the meeting, they informed him about the decision of the cabinet, to reconsider the selling price of Yemen’s LNG to cope with the international market price, remove any prejudice against the rights of Yemen and maintain the interests of all stakeholders in the Yemeni LNG export.

This highly unusual move has come about because, as Yemen has agreed long term 25 year contracts with its two main buyers, they are not affected by fluctuations in the gas market, and while it guarantees revenue streams at a time when there is a supply glut, it does not always achieve the best price. Currently prices are on the rise and the Yemeni government wants to take advantage of this.

Yesterday, Yemen’s President, Ali Abdullah Saleh confirmed that Yemen had become an oil importer due to low oil production and rising oil demand in the economy. With the falling oil revenues, Yemen is increasingly going to have to look to LNG exports to buoy up their balance of trade.

It is a readily acknowledged fact that Yemen LNG is the country’s biggest investment to date at US$ 4.5 billion, and it is projected to generate between US$ 30 - 50 billion in revenue over the next 25 years. While this is no mean achievement, it belies the fact that Yemen is the poorest of the Arab states and has the smallest reserves of oil and gas. They are also fighting secessionists in their own country and the Yemeni cell of Al Qaeda.

However, while Yemen may feel they deserve a higher price ‘in the national interest’ as they put it, South Korea may not see it that way. Attempting to renegotiate a long-term contract is highly unusual and may do more harm than good in the long-term, and scare off potential buyers.

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