Expansion of Yemen’s Refining Capacity Raises Terrorism Concerns

Publication: Terrorism Focus Volume: 4 Issue: 16

On May 16, the Yemeni-Gulf Oil Services Company (YGOSC) announced its intention to build a refinery in the Ras Essa area of Hodeidah Province on the Red Sea coast. Scheduled for completion in August 2009, YGOSC expects the project to increase its refining capacity by 35% over existing capacity (Yemen MOM; Saba News, May 16). The project represents a key part of the Yemeni government’s optimistic plan to expand its hydrocarbon production and refining capacity. This development highlights the possibility of future terrorist attacks on Yemeni energy infrastructure, which could destabilize a key U.S. ally and probably cause an increase in oil prices. A historical trend of attacks on oil infrastructure has been ongoing in Yemen since October 2002. In addition, al-Qaeda has publicly and repeatedly issued directives and fatwas calling for strikes on oil-related targets in the Arabian Peninsula since 2004.

The Yemeni government derives 70% of its revenue from oil production (Yemen MOM; Saba News, May 16). According to the U.S. Energy Information Administration, in 2006 Yemen exported around 330,000 barrels per day (bpd) of oil mainly to Asian markets. Although this figure represents less than one-half of one percent of the world’s total daily production, Yemen’s oil sector is significant as the stability of President Ali Abdullah Saleh’s regime appears closely tied to the state’s dependence on export sales of its hydrocarbons. The dependence on oil exports comes with additional negative political exposure. Unlike much of the petroleum production in the Middle East region, Yemeni production is heavily reliant on private foreign firms, with American, French and British companies controlling majority shares in a considerable number of concessions.

In order to diversify its revenue stream and build its weak economy, the Yemeni government is turning to natural gas production and marketing through the Yemeni Liquid Natural Gas Company (YLNG) in which they hold a 21.73% stake, with the remainder held by French, American and Korean companies. Planned projects include a 320-kilometer pipeline from processing centers in Marib to a liquefaction plant at Balhaf Harbor (World Press, August 4, 2006). The pipeline could be an attractive target for al-Qaeda given its strategic importance coupled with the fact that attacks have been carried out against oil pipelines in the past.

Perhaps of wider interest to the region is Yemen’s location at the entrance of the Bab el-Mandeb Strait, one of the world’s most strategic shipping lanes, through which three million bpd of oil is moved in tankers originating in the Persian Gulf, and passing through the Suez Canal en route to Western markets. Disruption of this shipping lane could divert tanker traffic around the southern tip of Africa, which would add considerable transit time and cost, resulting in sharp price increases of a wide range of goods and services.

Historical patterns and recent information indicate that the Yemeni state is at significant risk of suffering terrorist attacks on its energy infrastructure. These factors suggest that jihadis in Yemen and the greater Arabian Peninsula have both an intention and justification for undertaking attacks against oil and gas targets within Yemeni territory. There is a clear historical pattern of al-Qaeda’s targeting of energy infrastructure in Yemen, beginning with the October 2002 attack on the French Very Large Crude Carrier, the MV Limburg. The strike resulted in the spillage of 90,000 barrels into the Gulf of Aden and economic damage quantified as a $0.48/barrel price increase due to higher insurance premiums, which in turn caused an additional loss of $3.8 million in monthly port revenue (Maritime Transport Committee, “Security Transport: Risk Factors and Economic Impact,” OECD 2003). In the wake of a failed attack on the USS The Sullivans in January 2000 and a successful attack on the USS Cole in October of the same year, al-Qaeda has demonstrated a maritime capability that threatens the Bab el-Mandeb passage in addition to Yemeni oil infrastructure located along the coast. (Albeit, since the Saudi mastermind of those attacks, Abdul al-Nashiri, was detained in November 2002, no significant maritime attack has taken place in Yemen.)

In September 2006, days prior to President Saleh’s reelection, Yemeni security forces stopped a group calling itself Al-Qaeda in Yemen from detonating vehicle-borne IEDs on oil installations in Hadramawt and Marib Provinces. The next day, security forces reportedly detained four individuals on suspicion of plotting attacks on the Yemeni government and Canadian Nexen oil company facilities. The investigations into the oil facility and Sanaa attacks continued, but no charges were filed. These were the first attempted attacks in Yemen against energy targets since the attack on the MV Limburg. The timing and scope of the attacks just after Ayman al-Zawahiri’s September 11 denunciation of the theft of Arab oil revealed a degree of sophistication previously lacking on the part of al-Qaeda operatives in Yemen as the attacks occurred within 30 minutes of each other in different provinces.

In addition, sufficient justification exists for attacks on oil installations in Yemen. The 30th issue of the al-Qaeda-affiliated publication Sawt al-Jihad calls on jihadis to attack energy infrastructure as a means to both destabilize the hydrocarbon-dependent “apostate” regimes and to damage the economies of the West (Terrorism Focus, February 20). Although the publication is probably referring principally to the Saudi and Kuwaiti regimes, al-Qaeda and jihadis in Yemen view the Saleh regime as an apostate government. Its alliance with the United States and its reliance on oil revenue make its energy interests a desirable terrorist target.

The U.S.-aligned Saleh regime’s dependence on oil exports underscores the relative prominence of the oil target in Yemen. Recent events and al-Qaeda directives are consistent with a continued threat against energy infrastructure. Moreover, the Saleh government is in a precarious position. A counter-terrorism policy that is perceived as too aggressive could further alienate considerable segments of the population. At the same time, however, failing to act boldly increases the odds for jihadis who wish to strike at the regime’s only lifeblood. As a result, concern about the vulnerability of the planned Ras Essa refinery and Yemen’s overall energy sector to targeting by jihadis is warranted.