Natural Gas Incentive Framework for Yemen

Published in June 2007 as the result of a joint MENA Energy Unit / ESMAP undertaking, the Natural Gas Incentive Framework provides a comprehensive overview and analysis of the upstream and downstream natural gas sector.  It presents recommendations to improve the current gas exploration and production regime and to construct the National Gas Pipeline (NGP). 

Yemen is facing a significant decline in oil resources which accounts for the lion share of the Government’s fiscal revenues – up to 75%.  To offset this decline, the Government is actively seeking alternative sources of revenue, including from gas.  The report outlines that planned exports of gas through the Yemen Liquefied Natural Gas project and domestic gas sales to the power sector will be essential to partly offset the expected decline in oil production and associated fiscal revenues.  The non-hydrocarbon growth potential is limited and the most likely potential for additional sources of revenue in the medium term is the hydrocarbon sector.  Hence, it is paramount that the Government takes measures to further encourage oil and gas exploration and production activities, and to develop the utilization of natural gas.

The report demonstrates the economic viability of constructing the NGP and supplying the domestic power sector.  However, the report also acknowledges the perceived risk of the private sector in financing the domestic gas market development in Yemen and recommends: (i) the implementation of a clear legal and regulatory framework to govern the sector; (ii) the creation of an efficient gas market structure; and (iii) ensuring close coordination between the gas and power sector who will be the main anchor customer.

For more information, See Full Report