The First Forum on Energy and Development Concludes: Important Recommendations

The First Forum on Energy and Development in Yemen, which was organized by the SCSS and in which some international experts in energy, oil and gas took part, concluded its activities on June 3, 2009, and came up with a number of recommendations for improving the energy sector in Yemen.

For two consecutive days (Jun. 2-3), local, regional and international experts discussed a variety of significant topics under the four main panels on the agenda of the Forum:
• First Panel: Oil and Natural Gas as Sources of Revenues. Under this panel, some points were highlighted such as the extent to which the government budget relies on the oil revenues; an appraisal of the state's public budget and the growth rates during the last ten years; the global oil prices and their impact on the economic growth; an assessment of the effects (advantages and disadvantages) of the global oil price fluctuations on Yemen's economic progression over the last ten years, and the required reforms; the possible means of diversifying revenue sources; potential future challenges; presenting projections and proposals for available alternatives to generate revenues in Yemen under the current situations, with observing the most significant challenges that may prevent realizing this goal.
• Second Panel: the participant touched upon several points such as oil and natural gas industries (opportunities and challenges); the prospects of foreign oil companies' investments (requirements and risks), with a focus on the most important requirements for attracting investments and the potential risks; the government's policies; the energy reform program in Yemen; and the terrorist threats to oil industry.
• Third Panel: Here, the participants shed light on the global oil and gas industry status quo and future challenges; the financial crisis and its impact on oil and gas prices, the challenges facing oil and gas suppliers; the appraisal of the direct and indirect effects on oil and gas prices as a real challenge encountering suppliers, and anticipation of future; analyzing energy status quo; the dilemma of oil depletion; and future global oil and gas supply.
• Fourth Panel: the participants examined environmental effects on energy, and the alternatives for the traditional sources of energy, in an attempt to come up with a strategic vision for potential alternatives.
From the outset of the Forum, the participants' contributions focused on the oil sector and its relative significance for Yemen's economy. In this respect, Mr. Adel Hejer, a member of the SCSS, touched upon the role of the oil sector in boosting Yemen's budget, pointing out to the percentage of the oil revenues over the 1999-2008 period; this percentage reached about 80.55% of the total of exports, amounting to 19.45% of the oil exports during the same period, which means the oil revenues constituted the main source for the state budget as they accounted for approximately 76% of the budget over the same period. that is, the oil contribution to the GDP was about 30% versus the 8% contribution of taxes. As such, it is of paramount significance to promote alternatives.
Some of the alternatives available in Yemen, according to Dr. Latifa al-Thour, the professor of economics at Sana'a University, are petrochemicals, mining, fisheries, tourism, and textile industry. But, Yemen, according to what Dr. Mohammed al-Maitami said, should take measures that could be executed in the short run and whose fruits can be reaped and help the country to stand up in the face of the challenges it has been facing since the drop in the global oil prices. The solution to this problem, according to the General Manager of the Union of the Commercial Chambers, is to lift the oil subsidies which incur losses of about 3 billion dollars per annum, indicating that such subsidies went to the pockets of the undeserving people. Although the participants took issue with his suggestion for fear of the social and economic repercussions that might be triggered by such measure, the General Manager reminded his dissenters of the terrible situation in case the state's capital reserves eroded.
In his paper entitled "The Impact of Global Oil Price Fluctuations on Development," Jawad al-Hamad, the Director of the Carnegie Center for Middle Eastern Studies, showed that the correlation between oil prices and growth in the producer countries is different from that in the consumer countries, indicating that when there is an increase in growth in the producer countries, there is a decrease in growth in the consumer countries; but, when the revenues gained by the consumer countries as a result of fuel taxes (40 - 45% of fuel cost) are taken into account, we find that the growth in the GDP increases in those countries. This means, according to Hamad, the correlation between oil prices and growth should be measured in each state individually.
Andrzej Korowajczy, the Polish researcher and expert in the oil sector, shed light on the impacts of the global financial crisis on oil investments, pointing out that 35% of oil sector projects in the Middle East had been suspended until 2013 while the ongoing projects were faltering.
In their study on terrorist threats to the oil institutions in Saud Arabia, Yemen and Iraq, Dr. Mustafa al-Ani and Ms. Nicole Stracke indicated that in the recent years terrorists had launched, what they (terrorists) called, "economic jihad" in place of "political jihad". The two researchers concluded that the terrorist operations carried out against oil facilities had not achieved any success in view of the fact that oil facilities were well protected because of their high cost, citing the losses and failures inflicted upon terrorist perpetrators.
Dr. Rafael Sandrea, the international expert in oil industry, belittled the trepidation prevailing in Yemen as a result of oil depletion, mentioning that a lot of the world's oil fields such as in the North Sea, Russia and the US witnessed a decrease, but the technological advancement had helped innovate efficient means to increase the rate of production.

The Forum has come up with a number of recommendations for energy and development in Yemen, the most important of which are:
- intensifying security measures to protect oil facilities against any potential terrorist attacks.
- Continuing oil and gas explorations to include all promising fields and motivate national and international investing companies.
- Founding a giant national company that is well qualified to conduct oil exploration, production, oil refining and marking processes.
- Diversifying the sources of national revenues through promoting promising economic sectors such as tourism and free-trade areas.
- Providing an appropriate environment that encourages investment in energy sector and helps attract foreign capital.
- Using modern technological means to extract oil reserves through the innovative methods applied in other countries since decades.
- Expanding alternative and renewable energy such as wind, solar and heating energy.
- Completing the studies on and the infrastructure of electrical energy.
- Presenting the national strategy for generating power by gas.
- Expediting the implementation of the matrix and provisions of the national strategy for the alternative energy, especially those legislative, regulatory and technical aspects.
- Reviewing periodically the agreements concerning energy harnessing.
- Holding regularly a periodical forum on energy security to keep abreast with all developments regarding exploring, producing and marketing energy and its various traditional, renewable and non-renewable types.
 
Participants:
Representatives of a number of relevant agencies, and Yemeni and foreign researchers:
Dr. Lattifa al-Thour
 Dr. Ahmed Abdullahi Dahir
 Dr. Ibrahim Saif
 Mr. Jawad M. A. al-Hamad
 Ms. Nicole Stracke
 Mohammed al-Maitami
 Arwa al-Badani
 Dr. Mustafa al-Ani
 Ms. Glada Lahn
 Mr. Rafael Sandrea
 Mr. Ajoy Kumar Mandal
 Dr. Khaled Saleem
Mr. Andrzej Korowajczy