Country Report Yemen May 2011

Economic policy: Unrest fuels gas shortages

The economic impact of the political unrest is deepening and is having an increasingly apparent effect on everyday life. This is most noticeable in the supply of propane gas, used almost universally in Yemen for domestic cooking. The bulk of local supplies of propane comes from the northern province of Marib, and is distributed from there around the country. In early March, according to the Yemeni Gas Company (YGC), local tribesmen started to block the route to the capital, in solidarity with the opposition, saying they would not lift their blockade until Mr Saleh left office and a new government was installed. The YGC diverted its distribution through Shabwa but, once this route was blocked, it was subsequently forced to use a hugely circuitous route through the remote Hadramawt province. Even the Hadramawt route has suffered from disruptions, however.

Not only have the supply disruptions extended the time taken for the gas to reach the capital, Sanaa, it has also increased the cost significantly. In order to counter this, and ensure that sufficient supplies get through, the Yemen Observer, an English-language newspaper, reported that the YGC had even started importing gas from abroad, at a premium cost of US$1,100/tonne. However, gas is heavily subsidised, at less than US$350/tonne, which in turn left the company nursing heavy losses. Adding to the frustration, YGC is also a shareholder in the Yemen LNG (liquefied natural gas) export project, which supplies around one-third of total gas production to South Korea at a discount price of some US$200/tonne, according to Economist Intelligence Unit estimates.

High prices and supply disruptions have caused tensions on the streets of Sanaa. Long queues of residents waiting for deliveries have transformed into mini-protests, with consumers blocking roads and refusing access to traffic. Such is the gap between supply and demand, that, according to local reports, the contents of delivery trucks are selling out within ten minutes, leaving hundreds of increasingly irate consumers empty-handed.

© 2011 The Economist lntelligence Unit Ltd. All rights reserved
Whilst every effort has been taken to verify the accuracy of this information, The Economist lntelligence Unit Ltd. cannot accept any responsibility or liability for reliance by any person on this information
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