DUBAI Feb 16 Pressure on French energy giant
Total to pay more for liquefied natural gas that it
ships from Yemen has intensified, with the state news agency
reporting that the long-term deal is being probed by public
Total's leading role in building the $4.5 billion Yemen LNG
export plant in 2005-09 made it the largest foreign investor in
the country, which is one of the poorest in the Arab world.
Since coming to power in 2012, the new government in Sanaa
has complained that deals signed by officials under previous
president Ali Abdullah Saleh undervalued the gas and deprived
the state of desperately needed public funds.
Last week, official news agency Saba quoted unnamed judicial
sources as saying the government's Public Funds Prosecution
service, which helps to track down corrupt public officials and
retrieve funds from them, had started to probe the arrangement
The investigation, which began two months ago, encompasses
several Oil Ministry officials linked to the deal and Total
officials in Yemen, Saba reported without elaborating.
Contacted in France, Total did not respond to a request for
comment. Yemen government officials were not available to
comment on the Saba report.
Stephane Michel, Middle East president of Total's
exploration and production division, met with Yemen's oil
minister Ahmed Dares in Sanaa last week to discuss altering
prices of LNG sold to Total, Saba said without giving details.
Total is the biggest investor in Yemen's gas export industry
through its 40 percent shareholding in Yemen LNG; U.S.-based
Hunt Oil has 17 percent, state-run Yemen Gas Co 17 percent and
Korea Gas Corp (Kogas) 6 percent.
Before work on the LNG project began in 2005, Yemen LNG
agreed on 20-year deals to sell 2.05 million tonnes per annum
(mtpa) to South Korea, 2.55 mtpa to France's GDF-Suez
and 2.10 mtpa to Total.
Kogas had a five-year renegotiation clause in its oil price-
linked contract and last December agreed to a sharp price
increase, to nearly $14 per million British thermal units
(mmBtu) based on current oil prices from around $3, according to
a statement from Yemen's cabinet.
The contracts signed by Total and GDF-Suez were structured
differently; since the two Western firms intended to ship most
of the LNG to the United States, their deals were linked to the
U.S. Henry Hub gas price index. GT-HH-IDX
In mid-2005 the U.S. LNG price was around $7 per mmBtu, but
by the time the Yemen facility loaded its first cargo in late
2009, U.S. gas prices had collapsed below $2, largely due to the
U.S. shale gas production boom.
As a result, Yemen LNG agreed to let Total and GDF-Suez
divert the cargoes to Asia, where prices have risen sharply over
the last few years and are currently near $20 per mmBtu. Around
80 percent of the gas sold by Yemen LNG to Total last year was
shipped to Asia, the Yemeni company said.
In a statement last week, Yemen LNG defended the contracts
signed with all three companies, saying they were subject to
scrutiny at the time by the oil ministry, reviewed by parliament
and then formally approved by the government.
Yemen LNG has estimated it will generate around $60 billion
in revenues for the Yemeni government over the next 20 years.
LNG has become important as a source of foreign currency for the
country as frequent attacks on oil pipelines by militants and
local tribesmen angry at the government cut oil exports.
(With additional reporting by Michel Rose; Editing by Andrew