Yemen LNG Project on Track, but Firm Denies Contract with Israel's Starlims

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Researched by Industrial Info Resources (Sugar Land, Texas)--The Yemen Liquefied Natural Gas Company (YLNG) (Sana'a, Yemen) has denied reports that the firm has entered into a contract with Starlims Technologies Limited (Tel Aviv, Israel) to install a data-analyzing computer system at YLNG's liquefied natural gas (LNG) export project being set up in southeastern Yemen at the port of Balhaf off the Arabian coast.

YLNG is a joint venture company, 16.73% of which is owned by the state-operated Yemen Gas Company (YGC) (Sana'a), 39.62% by Total SA (NYSE:TOT) (Paris), 6% by Korean Gas Corporation (Gyeonggi-do, South Korea), 17.22% by Hunt Oil Company (Dallas, Texas), 9.55% by SK Corporation (Seoul, South Korea), 5.88% by Hyundai Corporation (SEO:011760) (Seoul), and 5% by Yemen's General Authority for Social Security & Pensions.

Al Wahdawi, a Yemeni news site, first published reports of the involvement of Starlims in the LNG project. The website reported that Starlims would supply Total with computer systems to analyze data and laboratory results of samples from the project site. According to the news report, the tender documents submitted by Starlims are believed to have stated that its headquarters are in Hong Kong instead of Tel Aviv. The news report caused embarrassment to the government of Yemen, since it does not share diplomatic relations with Israel.

Saba, Yemen's official news agency, has reported that YLNG examines every contract that it signs and the company is not authorized to make business deals with any Israeli firm. YLNG officials have stated that of the many companies involved in the project, none are from Israel. Since the project shareholders include the Yemen Insurance Company (Sana'a) and Yemen Gas, and Yemen's Minister of Oil and Minerals is the chairman of the board of directors of YLNG, the company cannot include any Israeli firm as part of the project. Yemen has been maintaining an official boycott of all Israeli companies in support of a boycott call by the Arab League.

Yemen is a small non-OPEC oil-producing country with a production capacity of about 320,000 barrels per day (BBL/d). The $3.7 billion LNG project is the country's largest industrial project to date. It will have a production capacity of about 143,000 BBL/d. About 40% of the funds for the project have been raised by equity and 60% by loans from financing institutions and commercial banks.

The project will source gas from Block 18 of the Marib fields in central Yemen. The gas fields have proven reserves of 9.15 trillion cubic feet (tcf) and 700 billion cubic feet of probable reserves. About 1 tcf of gas has been allocated for domestic use.

The project is designed to have two LNG trains using the proven Air Products & Chemicals' (NYSE:APD) (Allentown, Pennsylvania) C3/MCR process. The Ready-For-Start-Up (RFSU) date for the first train will be near the end of the first quarter of 2009. The second train's RFSU date will be in the third quarter of 2009. The project was 90% ready as of January 2009. In November 2008, a major milestone was reached when gas from the Marib fields arrived through the newly constructed 320-kilometer pipeline. The gas is currently being used for power generation and other processes required to be undertaken for plant commissioning and start-up.

YLNG has three long-term sales contracts with Korean Gas, Total Gas & Power Limited, an affiliate of Total SA, and Suez LNG Trading SA, which is an affiliate of GDF-Suez SA (EPA:GSZ) (Paris). Yemen's government expects the project to earn $30 billion to $50 billion over the next 20 to 25 years.

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