Peace in Yemen to breathe new life into Bab al-Mandab

A peaceful phase would also facilitate the proper utilisation of Yemen's underdeveloped oil and gas resources, which constitute the largest proportion of the country's undeveloped GDP

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Pro-government forces walk in the port of the western Yemeni coastal town of Mokha on February 9, 2017 as part of a major offensive to recapture the coastline overlooking the Bab al-Mandab strait.

Peace in Yemen to breathe new life into Bab al-Mandab

Faisal Faeq

last update on 12 May 2023

Dubai: The Yemeni peace agreement is expected to revive maritime trade in one of the most crucial global waterways, the Bab al-Mandab Strait.

The 20 kilometre-wide strait, which is a significant artery for global economic and trade movement, has been a target of attacks that threaten the security of oil tankers and commercial ships.

However, the agreement's continuation could save hundreds of ships that are currently at risk of hostilities, thus safeguarding maritime navigation, global energy security, and international trade.

The return of peace to this vital waterway, which connects the Mediterranean Sea with the Arabian Sea and the Indian Ocean, would mean the arrival of energy supplies such as oil, gas, and petroleum derivatives to the European market and the Mediterranean basin.

In the past, tankers were forced to circumnavigate the Cape of Good Hope in Southern Africa due to security threats, resulting in longer voyages and greater fuel consumption, as well as increased insurance costs to mitigate risks.

With over 6 million barrels per day of oil and its derivatives passing through it, the Bab al-Mandab Strait is the world's fourth-largest waterway after the Suez Canal. It also facilitates the passage of approximately 10% of the world's liquefied natural gas and serves as the gateway for ships en route to the Suez Canal.

Reviving the oil and gas sector

Yemen, which has modest oil and gas reserves compared to the oil-rich Arab Gulf states, is known for being the poorest country in the Arab world, despite its proven reserves of about 3 billion barrels of oil and 17 trillion cubic feet of gas.

AFP — This picture taken on April 5, 2022 shows a view of the Panama-flagged bulk carrier ship "ATA-M" moored at the Red Sea port of Hodeida in western Yemen.

Yemen also consumes limited oil — no more than 60,000 barrels per day, according to data from the US Energy Information Administration.

Since its peak production of about 440,000 barrels per day in 2001, Yemen's oil production has significantly declined due to the natural decay of unkept oil fields in the country and frequent attacks on its oil infrastructure.

Since its peak production of about 440,000 barrels per day in 2001, Yemen's oil production has significantly declined due to the natural decay of unkept oil fields in the country and frequent attacks on its oil infrastructure.

Yemen produces two types of crude oil — Marib oil and Masila oil. Ten years ago, Marib oil production peaked at 62,000 barrels per day, and it was exported through the port of Ras Issa, located to the north of the port of Hodeidah on the Red Sea.

The peak production of Masila oil — which comprises more than 80 percent of the oil reserves in Yemen — reached about 105,000 barrels per day 10 years ago. It was exported through the port of Al-Shihr, located near the Omani-Yemeni border overlooking the Arabian Sea.

Fresh data on crude oil production in Yemen is scarce and unreliable. However, some figures suggest that total oil production in the country decreased from 125,000 barrels per day in 2014 to its lowest level of around 20,000 barrels per day in 2016.

Production then increased to somewhere between 40,000 to 60,000 barrels per day in 2019. Natural gas production also declined significantly, from 328 billion cubic feet in 2014 to three billion cubic feet in 2018, according to S&P Global data.

Impact of instability

The political climate in Yemen became increasingly dangerous after the Houthis consolidated their control over the country. This instability greatly affected the energy sector, as foreign companies were forced to abandon operations and evacuate their employees.

Repeated attacks on oil fields, pipelines, and export facilities at ports resulted in the shutdown of almost all oil and gas production in the country. The refinery in Aden, which has a capacity of approximately 150,000 barrels per day, was also closed due to the exacerbation of the ongoing conflict since 2015.

AFP — A picture taken on September 26, 2019 shows a view of the Yemeni flagged oil tanker Rudeef GNA, sinking in the waters off Yemen's second city and port of Aden.

As a result, Yemen is now forced to import all refined petroleum products. Additionally, the departure of French company Total from the country in the same year led to the closure of Yemen's only liquefied natural gas plant.

Yemen's oil and gas industry finds itself at a critical juncture, with production and export facilities currently closed due to the ongoing conflict. Resuscitating the industry would require the return of investment and international oil companies.

Yemen's oil and gas industry finds itself at a critical juncture, with production and export facilities currently closed due to the ongoing conflict. Resuscitating the industry would require the return of international oil companies.

However, the likelihood of their return remains uncertain due to persistent security risks and unresolved questions about future political stability.

Yemen's strategic location and economic potential have yet to be fully capitalised on, with a lack of storage facilities for oil and its derivatives, as well as facilities for fuelling oil tankers and commercial ships passing through the Bab al-Mandab Strait.

However, peace and political stability in Yemen would undoubtedly support the country's economy and the revenues of its sea lanes and ports. It would maximise the benefits of its location along major sea routes, allowing for easy access to markets in Asia, the Pacific, and Europe.

A peaceful phase would also facilitate the proper utilisation of Yemen's underdeveloped oil and gas resources, which constitute the largest proportion of the country's undeveloped GDP.

This could lead to radical solutions for the fuel crisis that has adversely affected the lives of Yemeni citizens and disrupted many means of transportation and services.

Additionally, economic projects accompanying the peace process are expected to provide many job opportunities and curb unemployment.

The China factor

Since 1986, international companies from the United States, Indonesia, Austria, France, South Korea, and Japan have invested in Yemen's oil and gas sector. However, China, which imports Yemeni crude oil and has a presence in East Africa, has refrained from investing in the sector.

It remains to be seen whether China's mediation in restoring Saudi-Iranian diplomatic relations will lead to a new era of Chinese investment in Yemen.

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