As the civil war in Yemen that began in 2015 has continued for more than 10 years, the concerns of domestic corporations that were conducting a liquefied natural gas (LNG) business there are deepening. Korea Gas Corporation (KOGAS), SK, Hyundai Corporation, and other participants have been hanging on while only continuing to pay the expense to maintain the Yemen gas field project.
According to the energy industry on the 7th, KOGAS held a board meeting last month and approved an agenda item to change the investment period and investment cost for the Yemen YLNG project. The item included extending the investment period for the suspended Yemen LNG development and increasing the investment cost.
Originally, the contract period for this project was set through 2034, but as development was halted due to the civil war, the end point was pushed back to 2044. The investment cost was also increased for the expenditure of operating expenses to maintain the local developer.
The Yemen YLNG project is a project to produce LNG in Block 18 in the central Marib region, 180 kilometers east of the capital, Sanaa. This area has been confirmed to contain massive deposits of natural gas in addition to oil. The LNG produced from the gas field amounts to 6.7 million tons per year, which corresponds to 14% of last year's domestic LNG consumption (46.33 million tons).
The YLNG project is owned by the SK consortium (9.6%), KOGAS (8.9%), and Hyundai Corporation (3.0%), among others, as equity holders.
The Yemen LNG liquefaction plant project was a lucrative "blue-chip project." KOGAS invested $284 million (about 411.6 billion won) in building Yemen LNG and, until the civil war broke out, earned $296 million (about 428.2 billion won), achieving a recovery rate of 104%. Hyundai Corporation earned $103 million (about 149.0 billion won) in dividend income. The SK consortium held the largest equity among domestic corporations and is estimated to have received more dividends.
The situation changed when the Shiite Houthi rebels overthrew the government in 2015. The Houthis took control of all of northern Yemen, and as the Abd Rabbu Mansour Hadi government that ruled Yemen at the time was driven to Aden, the LNG business was also pushed to the brink. In the end, in April 2015, TotalEnergies, the largest shareholder of YLNG, withdrew its nationals over safety concerns, and production at the gas field was halted.
As the civil war in Yemen continues, domestic corporations have been spending only maintenance costs for more than 10 years. Although the development project has been suspended, each company is said to be bearing hundreds of millions of won in operating costs every year.
In the energy industry, many expect the Yemeni civil war is likely to drag on, meaning the blind outflow of operating expenses by domestic corporations will also continue. The Houthi rebels, who control northern Yemen, are continuing the civil war with the Hadi government based in Aden while receiving support from Iran, another Shiite nation. With Saudi Arabia and the United Arab Emirates (UAE) intervening, the civil war is expanding into a proxy war of foreign powers.
An industry official said, "Although the Yemen YLNG project has been suspended due to the civil war, considering the massive natural gas reserves, it is judged to have sufficient value to maintain," and added, "We will continue to monitor changes in Yemen's situation and consider future response measures."