Oilfield in Shabwa (Al-Jazeera)

Shabwa: Promising Oil Sector Shared by Fake Companies and Vague Partners


Wed, 06-07-2022 03:04 PM, Aden

Raad Alrimi (South24)

The governorate of Shabwa in South Yemen is known by its oil and gas resources. It is among the richest governorates in the country along with its neighboring governorate, Hadramout. Shabwa is full of many important oilfields along with ports as well as vital and strategic facilities.

However, like other oil sectors in South Yemen, Shabwa's sectors are dominated by the influence which has been empowered by the Yemeni Unity regime over the decades. The no-state status created networks of corruption dominated by Northern influential figures affiliated with the regime and tribal leaders in addition to some Southern partners under mostly fake names and entities.

The influence networks have been tied with the international oil companies which found in Shabwa a fertile environment for low cost oil and gas explorations. There is no real inspection on the activities of these companies and their work methods to preserve wealth and capabilities and make the best use of them. 

Promising sector 

Engineer and academic Mohsen Saleh Abdulhaq told "South24" that "Shabwa is the second biggest oil producer in the country after Hadramout with a daily production rate of 60000 barrels. It is also the second biggest gas producer after Marib and the first in the country in terms of gas reserves".

He added: "If there is a good administration for the oilfields in Shabwa by a national company affiliated with Shabwanis, it will soon be the biggest oil and gas producer".

The Head of the General Authority for Oil Explorations and Production Union and the Secretary General of the General Unions of Oil and Minerals, Mahmoud Mohammed Saeed said that "the importance of Shabwa sector is not limited to oil and gas storage but also the oil ports in the governorate and the pipeline system which allows the international companies to pump oil from huge tanks into the ports for supplying the ships and selling".

"South24" Reporter Raad Al-Rimi during a meeting with The Head of the General Authority for Oil Explorations and Production Union and Secretary General of the General Unions of Oil and Minerals, Mahmoud Mohammed Saeed.

An academic study authored by Dr. Abdulmalik Bin Hajar and seen by "South24" listed the most important oil sectors in Shabwa and their oil production before 2015 as shown below:

1- The S2 Sector-Aqla which, run by the Austrian company "OMV", produced 20000 barrels a day.

2- The S1 Sector-Beihan, run by the Canadian company "Oxy", produced 10000 barrels per day.

3- Sector 5-Jannah Hunt. It was run by the American company Jannah Hunt and its partners. It produced between 30000-40000 barrels a day. 

4- Sector 10-east of Shabwa is run by the French company "Total". Its production reached at the level of 50000 barrels a day. It is shared between the public and private sectors.

5- Sector 4-Ayaz area is run by the public Yemeni Company for Oil and Mineral Investments. 

In this regard, Engineer Abdulhaq said: "Shabwa has more than 16 oil and exploratory sectors. There are top-notch odds to explore oil and gas in the exploratory sectors. Moreover, Shabwa contains the Balhaf Port which is the biggest gas export port in the country.

Corruption and the lack of oversight

Eng. Abdulhaq said: "There is a big amount of corruption in Shabwa's oil sector along with neglect and international alienation. So far, there are no national oil companies affiliated with the government like Hadramout's Petromasila and Marib's Safer.

He added: "The corruption is also represented in the chaos of moving the operation of many wells from a company to another in an illegal way such as Sector 4 in Ayaz whose production doesn't exceed 50 barrels a day while it used to produce 10,000 barrels a day in 1996."

He added: "Sector 20 in the governorate suffered from corruption. This sector is classified by the Oil Ministry as a producer although it does not export even one barrel as a result of the corruption of the companies that worked in it. They began with the companies affiliated with the Northern Al-Rowaishan Group to Safer Company and even the Oil Investment Company to which the sector's powers were moved although it is not an operative company".

Abdulhaq added: "Likewise, Sector S1 suffered from corruption and was sold in 2020 to a company called Bestik. There are attempts today to sell Sector S2 in Al-Aqla area to Spec".

He added: "These attempts have not yet succeeded due to the dispute among oil influential figures. This led to thwarting the selling deals between the government and some companies. This previously pushed President Hadi [1] to intervene to shift the sector to Petromasila which has so far failed to operate it."

Sector 5

Abdulhaq noted that Sector 5 (Jannah Hunt) was subjected to corruption and was sold by "Hunt" to "Kuwait Energy" in 2013, then to the Chinese "Wilt Cat" [before being handed over to vague partners].

Mahmoud Saeed told “South24" that he blames the Yemeni government and the Oil Ministry for what he called "the corruption of international companies".

He believes that the "deliberate alienation of the role of the General Authority for Oil Explorations by the government and the Oil Ministry in particular made us unaware of all important details about these international companies as well as their impact and role. This is absolute and obvious corruption".

Saeed believes that "the expansion of corruption in Shabwa's oil file is due to the interference in the powers of the General Authority for Oil Explorations". He indicated that "most corruption cases which were revealed came after some oil international companies decided to leave the sectors in which they invested. Instead the ownership of these sectors return to the Public Authority for Oil Explorations, local subcontractor companies are established".

He said: "Unfortunately, the oil sales revenues of these companies don't go to the Finance Ministry or the Central Bank or the State's coffers but they are affiliated with former Presidential figures".

Saeed listed some companies that don't transfer their shares to the state's coffers including "Canadian Nexen" whose shares moved to "Petromasila". The list includes "Hunt" whose shares moved to "Safer". Moreover, there are many companies which were incorporated into the ownership of Petromasila similar to what happened in the Masila Sector in Hadramout, in which Total was investing.

In a previous report in 2005, the Central Organization for Control and accounting recommended the need to reconsider the work systems and the procedures regarding supervising and oversight on the activities of the oil companies in the country between the Ministry of Oil and Minerals and the General Authority for Oil Explorations.

The Central Organization for Control and accounting's report (2005)

Expert Mohammed Salim Majour accused the Yemeni Oil Ministry of orchestrating a corrupt deal through which the work will resume soon in Sector 5 by Petromasila which is not specialized in operating such sectors.

He told "South24" that "oil sector revenues are limited to some figures and at the top level of the state". He added: "The ties between the oil sector and the highest level of the state constitutes one of the biggest corruption hotbeds that deplete the country’s resources".

Legal loophole 

According to experts, "the Force Majeure Law [2] which allows international oil companies to stop their activities in the sectors in case of war or natural disasters is a legal loophole exploited by these companies to delay productive sectors for years without operating the sector or giving up the shares of these companies to other production companies".

Majour said: "A number of sectors stopped due to the conditions which swept the country. They have not resumed although the conditions calmed down. The Austrian company OMV resumed its activities in 2018 but it didn't develop the oilfields in which it works and didn't activate the oil wells".

He added that "the company's production decreased to the level of 4000 barrels a day". He claimed that "Sector 4 also works but the company destroyed the oilfields by its neglect. The production reached the level of only 100 barrels a day".

OMV, the operator of Sector "S2-Al-Aqla" announced its "intention to start the process of selling its assets and gradual withdrawal from Yemen, according to the international oil website B&S Global".

The company is expected to hand its assets over to a new company called "Spec" which is not known in the oil sector and its identity is not yet clear.

Noor Yemen

Exclusive sources told "South24 '' that the Yemeni Oil Ministry agreed to hand over Sector 5-Jannah Hunt to a vague company called "Noor Yemen'' in addition to Petromasila by instructions from the minister''. According to the sources" the selection of Petromasila to operate the sector aims at covering the role of the fake companies like "Noor Yemen" in favor of unknown figures and partners".

The sources said: "This move came as a result of the ties between the family of former President Hadi and the Petromasila's GM Mohammed Bin Samit".

The sources claim that Petromasila and Yemeni Oil Minister push for selling oil from Sector 5 in favor of vague partners who control the sector.

The sources told "South24" that "Noor Yemen is a subcontractor company which violates the Presidential Law issued in 2012 regarding the establishment and organizing the Yemeni Council for Transparency in the Extractive Industries as well as [3] the agreement with the Supreme National Anti-Corruption Authority and the Transparency Coalition for Extractive Industries which forbid subcontract activities [4]."

"South24" conducted extensive research about the alleged company "Noor Yemen" and we didn't find any data for it on the internet or an official address or any official deals in the local markets or anything that denotes its relationship with the oil sector.

However, trade union sources exclusively told "South24" that the company is one of the subcontractor companies amid strong reservations about the information that belongs to this company or the entity that works for it, and whether this company provides its money to the Central Bank or its revenues benefit governmental or private figures.

However, a report issued by a Qatari website On Saturday quoted an official in the Oil Ministry saying that "the ministry restored Sector5-Jannah Hunt in Shabwa's Usaylan and thwarted attempts to hand it over to an unknown company".

In November, the Ministry of oil itself announced that Petromasila received Sector 5 (Janna Hunt) from the Contractor Group which operated the Sector in the presence of the Minister of Oil and Minerals Abdul Salam Baaboud.

According to the official agency "Saba", the production in Sector 5 stopped years ago. Some foreign companies affiliated with the Contractor Group exploited that period to create institutional chaos in the ownership of shares. This necessitated the intervention of the Ministry of Oil to work on resuming the production process.

"South24" contacted the Yemeni Prime Ministry to comment on the accusations included in the report. A letter which included all these accusations was officially sent to the Prime Minister's secretary but we have not received a response till the time of publication of this report.

Moreover, "South24" received promises from the Director of the Office of the Ministry of Oil to coordinate a meeting with the Deputy Minister. However, after procrastinating for more than three weeks, those promises have not been achieved.

Raad Alrimi

Journalist at South24 Center for News and Studies in Aden

South YemenShabwaOil sectorBeihan