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Corrupt oil deals continue absent parliamentary reform

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SANA’A, Oct. 12 — As anti-corruption activists report that violations have risen in Yemen’s oil industry in 2011, resignations by parliamentarians who have joined the anti-government protests are presenting an obstacle to reform.

The coalition named The National Coalition against Oil and Gas Suspicious Deals consists of 21 parliamentarian members, businessmen, Oil engineers, lawyers and nine NGOs. They learned that the Oil Ministry is re-newing some contracts with oil companies illegally and without proper announcement.

“The problem is corruption…prioritizing self-interest over the public’s interest leads to more issues for the country to suffer from when talking about the oil sector, and this due to inefficiency,” said Mohammed Al-Absi, anti-corruption activist of the NCOGSD.

The corruption in oil companies’ deals is mostly reported in terms of production expenses,” according to Al-Absi. “The national company Safer always gives the cheapest offer based on those terms, yet the government prefers to deal with foreign companies.

“Safer proved that the quality of their work is good and makes cheaper offers. It cost them only US$3 per barrel for production expenses, when Hent used to do it for US$9,” he explained. “The problem is huge, as these deals last for decades – at least 15 years – so letting these deals happen now while the revolution continues will cost the country a lot later on.”

According to Al-Abssi, oil in Yemen and Gulf nations does not require high expenses, as the oil is near the sea surface.  “One of the companies takes US$29 for production costs, which is crazy according to the fact that digging for the oil does not cost this much and the government knows it.”

Areas marked off for oil extraction are termed ‘blocks’. The recent renewed contract is for Block 18, which is a new Block that can still bring huge benefits to the country if used well. “While the foreign company who renewed the contract for Block 18 carried benefits for Yemen, still, this new block should be bid upon by more companies, thereby providing the best offer and the possibility of more jobs for Yemenis,” said Al-Abssi.

The tragedy of the Korean Company gas deal, in which Yemen was obliged to sell the gas for just US$3 for the million Thermal Unites, when locally it costs US$9, is that the country particularly suffered from gas and oil shortages from May to June and, on a broader level, for the past nine months. The exported oil was not affected, according to the Central Bank’s Research and Studies Department.

In their latest report, Yemen’s Central Bank stated that oil exports have netted the bank over two billion US dollars since the last seven monthes . The problem, according to Anwer Al-Bakry from the Bank’s Research and Studies Department, is that the country spends more on importing basic materials – not to mention oil itself. “It costs us close to two billion US$ to import oil products,” said Al-Bakry.

“We cannot cover the nation’s needs for oil products. We also have problems due to the contracts Yemen has with other countries. Local oil needs should be covered by Marib oil fields. Due to the contracts Yemen has with other countries, while domestic oil needs are covered by the Marib oil fields, oil from Al-Maseela and Shabwa is set aside for export,” Al-Bakri explained.

In recent months, there was a huge demand for oil as a result of damaged pipelines in Marib. While oil continued to flow out from Yemen to foreign markets, domestic needs went unmet.

According to Al-Bakri, although local oil needs are huge, the country is obliged to export the oil – and also to import it to cover local needs. However, when new oil fields are discovered, the Supreme Oil Committee chooses to export the oil because of the Central Bank’s need of foreign currency.

From his side, Al-Absi claimed that the government has no efficiency when it comes to running the oil business in the country. “The government does not have any restrictions on foreign countries’ work in Yemen. All the oil companies work without restrictions.”


Written by shatha

October 17, 2011 at 8:28 am

Posted in Violation

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