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Fears of security deterioration in Yemeni oil regions

1st February 2013


The security situation for oil companies in Yemen is getting increasingly precarious and complicated according to sources, as the defection of senior generals with many of their troops from the eastern, south-eastern and southern military districts to Yemen's capital Sana'a or other areas in the vicinity of Yemen's main northern and central cities, is leaving the countryside and key oil areas exposed. Still, only one significant security incident involving the oil industry has been reported—an explosion at a key oil pipeline linking to the Red Sea coast—with Al-Qaeda presence in Yemen being known in the greater Shabwa area, one of the oil areas now largely unprotected by heavier Yemeni army units, this might only be a question of time.

Oil companies operating in both the Ma'rib and Shabwa areas will increasingly have to rely on their good relations with local tribes and political groupings. This is going to make their situation significantly more fluid, and is also likely to require a greater investment in building relations with the local population, in the short term likely requiring some direct investment into the local patronage networks. While most Yemenis understand how badly needed the IOCs are for the country's revenues, the control of some of that revenue acts as a lure to many of Yemen's political and tribal groups, including the increasingly strong front advocating the secession of southern Yemen.
 
An explosion ripped through three gas pipelines outside the central Iranian city of Qom on Friday (8 April), disrupting important gas flows from the south of the country to its densely populated north, several Iranian media outlets report. The blast comes almost two months after a previous large explosion ruptured three gas pipelines outside Qom.

According to Iran's Mehr news agency, the blast took place 74km away from the town of Delijan, close to the road leading to Qom, which is the Islamic Republic's foremost centre of religious seminaries and learning.

The main pipeline severed was the 56-inch trunk pipe carrying 250 mmcm of sales gas from the South Pars, Fajr Jam and Parsian treatment facilities. The outage lasted less then 24 hours, however, with Iranian media reporting that gas flows were restored on Saturday (9 April). While there was no official comment from the National Iranian Gas Company (NIGC) on the reason for the blast, Iranian member of parliament, Hossein Naqavi-Hosseini was quoted by the country's Press TV as saying that "based on investigations, the explosion in Qom gas pipelines was a terrorist attack".

No group was known to have claimed responsibility for the blast, with Naqavi-Hosseini blaming "Iran's enemies" for trying to "create insecurity in the country to divert public attention from the crimes they committed in the region"—a euphemism usually reserved for the United States', the United Kingdoms's and Israel's intelligence agencies.

The explosion in three pipelines running more or less parallel in the vicinity of the city of Qom is the second this year and although repairs both times have been quick and able to avert any gas shortages in the northern and north-western parts of Iran, the hit—against, what by many is seen as the religious nerve centre of the Islamic Republic, if mostly ceremonial, when it comes to politics—carries some significance. The chance of an accident again so soon after the first blast seems remote, although the Iranian pipeline system is suffering from being considerably under-maintained. With protests against the government having been harshly quelled since mid-2009, some elements might have increased their militancy, although the choice of target which, unless repairs are done swiftly would hit the general population, does appear quite surprising.
 
Iran has budgeted USD16 billion of investment into the development of its large South Pars offshore gas deposit in the Gulf Sea this year, in a sign that it will seriously struggle to invest the USD200 billion needed during the current five-year plan, which has just begun. Pirouz Mousavi, the managing director of Pars Special Economic Energy Zone (PSEEZ) told Iran's IRNA news agency that "daily production of more than 700 million cubic meters in the giant gas field is the goal of the ministry" during Iran's Fifth Development Plan (2010-15) and that early production from the field's phases 15-18 was planned to start within the plan's timeframe. Production at the South Pars field still stands at around 200-210 mmcm/d and Mousavi himself was quoted in March saying that over USD200 billion of investments into South Pars was needed to develop the field within the current development plan.

As IHS Energy has been saying for several years, there is little chance that Iran will be able to start catching up with its own development plans and bring most of the South Pars field onstream within the current five-year plan. If this year's funding is to be extrapolated over the coming four to five years, only USD64-80 billion will be spent on development, leaving a shortfall of at least USD120 billion, and at a time when project costs again are set to rise. Iran's shortage of money looks particularly problematic given the current high oil prices, which provide the country with a very high export income. Years of populist spending practices have, however, left the government of President Mahmoud Ahmedinejad with an abundance of black holes to fill, while long-term projects and developments in the hydrocarbon sector are being neglected. Additionally, the fight against rapid mature decline at Iran's ageing oilfields—to protect its government's revenue generation—is requiring ever-increasing investment.

 For more information, visit www.ihs.com






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