An expert in development policies in the Ministry of Planning and International Cooperation, Abdualmajeed al-Batlai, expects that the total production of crude oil in Yemen may decline to 52 million barrels in 2015, compared with 65 million barrels in 2013. This will result in a decline in the government’s share of crude oil production to 34.1 million barrels in 2015.
In his study, Increasing of Subsidies on Oil Derivatives: Options and Processes, al- Batlai said that in the case that the refining capacity of local refineries stabilizes at about 22 million barrels annually, government exports will reach about 12.4 million barrels in 2015, which means the government’s share of crude oil exports will not be enough to cover the needs of imports of oil derivatives.
According to the study, power stations acquire 22.7% of the sales of oil distribution and 17.3% of the total volume of diesel sales. Therefore, the reforms of fuel subsidies should start by reforming the electricity sector by focusing on building power stations powered by alternative energy sources such as natural gas and renewable energy such as wind. Government agencies and the armed forces consume about 2.3% of the total national sales of oil products; therefore they must ration the consumption of those entities.
“Power stations, the government, and armed forces acquire 25% of petroleum products sold by the oil company. Therefore, even after the adoption of the policy of removing subsidies, the general budget will bear the difference of the price for more than 25% of the quantities of domestic consumption unless accompanied by the rationing of government consumption,” added al-Batlai.
The domestic consumption of petroleum products has increased in the past few years to 4.8 million metric tons in 2005 to 5.8 million metric tons in 2013 and the annual growth rate is up about 3%. This growth comes from the benefiting of the domestic support prices of oil derivatives.
The low amounts of domestic consumption of oil derivatives in 2010 and 2011 represented an exceptional case of continued growth in the previous years. Data indicates that the growth in quantities of domestic consumption of negative levels are 5.1% and 16.5% in 2010 and 2011, respectively, due to the scarcity of diesel supply by about 11.5% in 2010 and the acute crisis of petroleum products in 2011 as a result of the oil pipeline bombings.
Yemen is passing a critical point in its present and future development, so efforts should be intensified to expand the circle of research and exploration for oil, in addition to raising the efficiency of available resources and directing a larger share of it towards the development of economic sectors to improve the sources of production and national income.