YEMEN - Little Aden Refinery

This refinery, built between 1952 and 1954, is badly in need of upgrading. With a capacity of 170,000 b/d, it has long been operating at less than 100,000 b/d. It is run by the Aden Refining Company (ARC). Proposals to upgrade the plant so that it can run at its nameplate capacity of 170,000 b/d

have been delayed for years. On May 13, 1998, the government decided to sell a majority share in the refinery in the expectation that foreign or private investors would provide the funds necessary to upgrade the plant. The government also authorised private investors to sell the refinery's products on the domestic market. In late 1997 there were indications that the government would retain a consortium comprised of Tarmac of the UK and ABB Lummus Global of the US to carry out upgrading work worth $180 million, but the contract award is pending a final outcome of the move to privatise the refinery. A letter of intent to the two companies was first given in August 1996 after bids in 1995. But the government subsequently insisted on a re-tender for the project because the consortium had proposed setting up a new crude distillation unit, which the oil ministry decided was outside the scope of the original tender. The second tender process was done in mid-1997. The upgrade will involve the installation of a new 75,000 b/d crude distillation unit and a 45 MW power plant. The crude unit, to be built in the first phase along with sweetening units to treat kerosine, straight-run benzene and gasoline, will process crude oil from Kuwait and from Yemen's Maarib oilfield. The second and third phases of the plant would involve building the power station and installing catalytic reformers to further sweeten the crude. A basic engineering study for the project has been carried out by AMEC Process & Energy of Britain. The government has been limited in its capability to finance the project because, under the IMF structural adjustment programme, it is committed not to take on any new public debt. The consortium had proposed securing funds using future oil product sales as collateral. In November 1996, ARC had appointed Natwest Capital Markets as financial manager, but the company decided to withdraw from the project by July 1997. The Aden refinery came on stream in 1954. It was built by Bechtel of the US and George Wimpey & Sons for British Petroleum (BP), which operated it until nationalisation in May 1977; BP was retained to provide technical assistance for another five years. The refinery has 16 storage tanks. Before the Iraqi invasion of Kuwait, it processed crude oil from Iraq and Abu Dhabi. In addition it was refining about 100,000 b/d of oil under contract for clients including Iraq, Kuwait, Iran, the former Soviet Union, Coastal Corp. of the US and Petronas of Malaysia. Petronas is currently considering investment in Yemen's upstream and is interested in developing some of the country's natural gas reserves. Operations were severely affected by the Gulf crisis and the embargo on Iraq. At present the refinery processes crude oil from Iran and Oman, and an agreement with Petronas was revived in 1994. Local crude oil processed at the refinery includes Maarib Light and the government's share of production at

Masila. Of the total oil throughput, 60% is local and 40% is foreign. The refinery was damaged during the civil war of 1994, but was quickly repaired and by 1996 resumed processing at a rate of 100,000 b/d.