Oil price hike alleviates Yemen's slumping oil production

Gas and mining revenues still a long way from replacing oil as a revenue source.

Yemen’s latest EITI Report makes for sobering reading for those hoping the country's decade-long dwindling oil production would be offset by revenues from its gas and mining sectors. On the positive side, the EITI report released on 24 April 2014 shows that the increased oil prices provided a temporary breathing space in 2011: Yemen’s total government revenue from the sector actually increased by 7% to US $5.5 billion in 2011.

As in previous years, only 2% of payments from companies to government were made in cash and the rest was paid 'in-kind’, as barrels of oil. Two-thirds of this oil was exported, and one third was provided to refineries for domestic use.

Minister of Oil and Minerals, Khalid Mahfooz Bahah said that "The publishing of the Yemen EITI 3rd Report, will complete the coverage of seven fiscal years of EITI reporting for Yemen... The data contained is incrementally of superior quality in terms of scope, details and accuracy.  In the future, as enhanced cooperation and unity is achieved, the information contained in these EITI reports will be of even more value and effectiveness".

Gas and mining to the rescue?

Yemen’s nascent mining and gas industries are expected to play an increasingly important role in propping up the country’s economy. As the YEITI report shows however, gas continued to account for less than 4% of total reported flows to government in 2011. Revenues from gas increased slightly in 2011, from US $191m to US $199m. Less than one tenth of the gas production of 339 billion cubic feet was used domestically.

The government received no revenues from any of the 15 mining companies holding licenses in the country that year.

According to the International Monetary Fund, the extractive sector, dominated by the oil sector, accounted for 63% of government revenues in 2010-2012 and 89% of Yemen’s total exports in 2010. However, oil production of under 80 million barrels in 2011 was less than half of what it was a decade earlier.

As oil production continues to decline, the findings of the latest EITI report show the urgency of identifying new sources of income, and making best use of the country’s limited natural resources for its citizens. 

Download the Yemen 2011 EITI Report

For further information about Yemen’s EITI, please visit the country page on the EITI website.