OP-ED

Oil legislation necessary for Yemen’s future

The history of oil operations and production in Yemen is neither a pretty nor a profitable one. Rising oil production numbers over the past few years only serve to make the picture grimmer.
Yemen terminated two major contracts with international oil production companies Hunt Oil and Canadian Nexen Petroleum Company. Leaving aside the clearly negative handovers, handled unprofessionally by both sides in both cases, the government still failed to learn from its mistakes. No independent law for oil and gas operations for future partners was implemented, and no working plans to receive the soon-to-be-transferred oil blocks were put in place.
In the past, oil and gas contracts were confidential issues, subject to the approval of the ex-president to allow a company’s extension or to reject it outright. The absence of oil legislation today remains a challenge and oil and gas investment, with all its legal intricacies, continues to rest in the hands of one or two individuals. This issue compels the government to pay out more than what it earns from oil and gas operators, simply as a result of flawed contracts, or what are called Production Sharing Agreements (PSA) between the government and the companies. The latter will sign with a full and developed awareness of every aspect of the agreement. Not surprisingly, this ends up working out tremendously well for the companies.
The troubles that exist nowadays out at oil fields for some oil and gas companies – whether they be security issues, labor issues, union subcontracts or infrastructure implementation requirements – hardly amount to real troubles at all for them. Any losses or extra costs are paid for by the Yemeni government. No matter who or why the companies are paying, the money paid comes directly from the government’s share of profits. What makes things even worse are that some oil and gas companies sue employees for committing the most minor infractions or for unintentional work-related accidents. The employees are then made to run here and there fighting for their most basic rights. Who pays for the court costs? Again, the Yemeni government.
I can’t blame the companies for this. They follow the country’s rules, and a country that doesn’t apply proper business procedures sets itself up to be a victim of illegitimate statistics and faked studies. The false data that was provided three years ago regarding Block 18, leading one to believe that it would soon dry up, comes to mind. Oil operations in the Marib basin represent 60% of total production in Yemen’s oil business.
Even now, pipelines go unrepaired – despite statements from the oil minister, major issues continue to exist, and oil continues to be imported from abroad.
For the future, the Ministry of Oil and Minerals must prepare technical and legal experts to perform analyses of potential failures and successes before committing to further surefire failures. Such agreements only serve to further enmesh Yemen in unprofitability and corruption.