Experts hail Yemen's resumption of oil exports

The Yemeni government's decision to resume oil exports is a positive step that will help it disburse salaries and improve services, experts told Al-Mashareq.

On May 6th, the Supreme Committee for Crude Oil Marketing, headed by Prime Minister Ahmed Obaid bin Dagher, approved the sale of 2 million barrels of crude oil from the Masila oil field, local media reported.

Cathay Oil and Gas, chosen from among 30 competing companies, will purchase the entire quantity of crude oil in June.

Bin Dagher highlighted the importance of resuming oil production at pre-war levels, and of accelerating the rehabilitation and development of oil fields.

The oil sector is a key contributor to the national economy, he said.

According to the Ministry of Finance, oil contributes 30% of Yemen's gross domestic product (GDP) and accounts for 70% of the country's revenues and 90% of its total exports.

Bin Dagher asked government agencies to prepare diagnostic reports on the status of the oil sector and propose solutions to raise the level of production.

He urged international oil companies that invest in Yemen to resume their operations, saying the local authorities are ready to provide them with the necessary protection and facilities to ensure the success of their operations.

Meeting fiscal obligations

Opening oil sales to foreign companies is part of an effort to "normalise the economic situation and enable the government to meet its upcoming fiscal obligations", said Yemeni political analyst and writer Abdul Malik al-Yousefi.

This is especially important in light of the drop of the cash reserves at the Central Bank, he told Al-Mashareq.

After the Houthis (Ansarallah) seized the Central Bank in Sanaa, they squandered the foreign currency cash reserves, which dropped from about $4 billion to less than $1 billion last August.

This prompted President Abd Rabbu Mansour Hadi to relocate the Central Bank to Aden.

"Expenditure priorities must centre on paying army personnel and [government] employee salaries without delay, the formulation of a development plan, and the creation of an attractive investment environment in the liberated areas," he said.

Export of Yemeni oil abroad

The resumption of oil exports is key to raising revenue that will enable the government to meet its obligations, said economist Abdul Jalil Hassan.

In addition to resuming salaries to state employees, revenue from oil sales would allow the government to improve services, he told Al-Mashareq.

This is especially needed in the health care sector, which is on the brink of collapse due to the spread of epidemics and diseases, he said.

As of Friday (May 19th), a cholera outbreak in Yemen had killed 242 people, with nearly 23,500 others sick in the past three weeks alone.

"Oil is the government’s main source for funding the general budget, as oil revenues before the war represented 70% of the total budget revenues," Hassan said.

The government also must turn its attention towards resuming the export of liquefied natural gas (LNG), economist Abdo al-Wajihi told Al-Mashareq.

This is extracted from Marib and exported from Shabwa, he said, noting that both provinces are under the authority of the legitimate government.

The sale of oil and gas -- once the main source of state revenue -- would help boost the government's presence and effectiveness in the liberated provinces, al-Wajihi said.

"Oil exports play a major role for the government in providing the state treasury with hard currency, which in turn will stop the deterioration of the Yemeni riyal against the dollar," he said.

This will stimulate development through the implementation of investment projects that were halted because of the war, al-Wajihi said.