At the end of 2008, Yemen held 17.3 trillion cubic feet (tcf) of proven natural gas reserves, according to the BP
Statistical Review. Most are concentrated in the Marib-Jawf fields northeast of Sanaa.
Yemen LNG can produce 6.7 million tonnes per year for export from the Gulf of Aden port of Balhaf.
But the World Bank and analysts said potential revenues from LNG exports and domestic market gas would only partially offset losses from declining oil production.
"The revenues from LNG are going to help the government mitigate the declining oil revenues, but it is not sufficient to compensate for that," said Pierre Audinet, senior energy economist at the World Bank.
Oil production, which accounts for up to 75 percent of public revenue and 90 percent of export earnings, fell to
300,000 barrels per day (bpd) in 2008, the oil minister said. Output peaked at 457,000 bpd in 2002, according to BP figures.
"Yemen is facing the complete exhaustion of its oil reserves by the next decade, and will become a net oil importer by around 2011. So the Yemeni LNG project is enormously important," said Robert Powell, Middle East analyst at the Economist Intelligence Unit.
"They desperately need more income. The gas project is going to give them a breathing space, but it will not get much further than that," he added.
Julius Walker, a senior oil market analyst at the International Energy Agency, said Yemen would remain a net exporter of crude, but see output fall to 248,000 bpd by 2014. Oil prices dropped from a high of $147.27 last July to a low of $32.40 in December, the weakest since early 2004. They have recovered to peaks for the year so far of above $70 CLc1.
"Mobilising the gas is absolutely indispensable to Yemen's economic development. The key question is to design the right incentives to mobilise it. But that framework is not in place at the moment," the World Bank's Audinet said.