by Jane Novak at 9:05 pm on Saturday, June 19, 2010
Huge losses to the Yemeni treasury, I wonder who got the graft? In 2006 the South Korean delegation came home crowing about the excellent deal with Yemen. After recently threatening to renegotiate the contracts, Yemen now says it will stand by them. This is a very interesting article, one of the contracts has a floor and ceiling price.
une 18 (Bloomberg) — Yemen LNG Co. will honor its liquefied natural gas contracts with buyers including Total SA, GDF Suez SA and Korea Gas Corp., an official said, after the Middle Eastern state proposed to review them.
“They are long-term contracts which are binding and will continue to be respected,” François Rafin, managing director of Yemen LNG, said by telephone from Paris today. “The three contracts are priced at market prices.” He declined to give details on the prices, citing confidentiality agreements.
Yemeni President Ali Abdullah Saleh ordered a review of LNG contracts signed between Yemen LNG and customers to bring them in line with current gas prices, the official Saba news agency reported on June 15.
Yemen has turned to gas as an alternative to oil, the source of 75 percent of its income. Crude production may drop to 260,000 barrels a day this year from 440,000 barrels a day in 2001, according to U.S. Energy Department data.
GDF Suez is the plant’s biggest customer at 2.55 million metric tons of the fuel a year, followed by Korea Gas and Total at 2 million tons each, according to data on the website of Yemen LNG.
Total owns 39.6 percent of the 6.7 million ton-a-year Yemen LNG plant, with other major stakeholders including state-run Yemen Gas Co. having 16.7 percent, Dallas-based Hunt Oil Co. 17.2 percent and Korea Gas 6 percent, according to Yemen LNG’s website.
One of the three 20-year LNG contracts has a floor and ceiling price, which was sought to ensure security of revenue to repay the loans for the project, Rafin said. He declined to talk about “market prices” and said that these are “markers” that are quoted on a daily basis.
Korea Gas spokesman Lee Kwa Hyung was unable to comment yesterday on the Yemen government’s decision as he couldn’t reach the LNG import team. Korea Gas paid about $193 a ton, or about $3.67 per million British thermal units, for a cargo from Yemen this year, according to customs data. That compares with an average of $689 a ton the country paid for Qatari supplies.
“The Asian market was deliberately selected to ensure security of revenues at times when the U.S. gas market price might be depressed,” according to a posting on the website. “The U.S. market is expected to remain an attractive market for Yemen LNG due to high gas demand, which will provide significant additional revenues to Yemen.”
Natural gas for July delivery traded at $5.138 per million Btu, down 0.5 percent, on the New York Mercantile Exchange at 4:41 p.m. in Singapore. Prices were as high as $13.577 in July 2008.
The Energy Department reduced its forecast for 2010 U.S. LNG imports by 9.6 percent as rising supplies of domestic gas from unconventional sources such as shale and higher prices in Europe and Asia reduce the U.S. appetite for the fuel.