VZCZCXRO7510
RR RUEHDE RUEHDH RUEHDIR
DE RUEHYN #2225 3500952
ZNR UUUUU ZZH
R 160952Z DEC 09
FM AMEMBASSY SANAA
TO RUEHC/SECSTATE WASHDC 3398
INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE
RUEHFR/AMEMBASSY PARIS 0200
RUEHUL/AMEMBASSY SEOUL 0072
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHEFHLC/DEPT OF HOMELAND SECURITY WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHDC
RHEHNSC/NSC WASHDC
UNCLAS SANAA 002225
SENSITIVE
SIPDIS
DEPT FOR NEA/ARP AMACDONALD AND S/CT PSCHULTZ
NSC FOR AARON JOST
US COAST GUARD FOR JHANNAN AND KHANLEY
E.O. 12958: N/A
TAGS: ENRG EWWT ECON EPET PTER PINS PBTS FR KS YM
SUBJECT: YEMEN LNG PLANS SHIPMENTS TO CONUS, WORRIES ABOUT
BEING BLOCKED FROM U.S. PORTS
REF: SANAA 1064
1. (SBU) Yemen LNG, the liquefied natural gas (LNG) company
operated by majority shareholder French Total Oil, is
planning to ship LNG cargos from its plant in Belhaf, Yemen
to Sabine Pass, Texas and Everett, Massachusetts beginning in
early 2010 (REFTEL). Under the terms of YLNG's contracts
with its clients, one third of the production is dedicated to
GDF Suez and being sent to Everett Terminal near Boston,
another third is dedicated to Total and destined for Sabine
Pass, and a final third of production is being sold to KOGAS
in Korea. A U.S. Coast Guard port security assessment team
visited Belhaf December 10-12 to observe YLNG security
procedures on land and at sea during the loading of an LNG
tanker. Their assessment may have an impact on YLNG's
shipping schedule to CONUS ports, especially to Everett
Terminal.
2. (SBU) The Everett-bound LNG is being sold by YLNG on a
"Free on Board" (FOB) basis, meaning that the LNG buyer, GDF
Suez, assumes responsibility for the costs and risks of the
cargo once it is loaded onto the tanker. The Sabine
Pass-bound LNG is sold to Total on an "Ex Ship" basis,
meaning that the seller, YLNG, assumes all costs and risks
for the cargo until it reaches the port of destination. All
three LNG contracts are 20-year contracts with fixed
destinations, worth approximately USD 10 billion each at
prices negotiated in early 2009. If a YLNG cargo were to be
blocked from entering Everett Terminal, or if lengthy
conditions of entry were imposed upon Yemen-origin ships,
Suez GDF would be in breach of its contract with YLNG. If a
cargo were to be blocked from Sabine Pass, YLNG alone would
incur any losses.
3. (SBU) YLNG management personnel have been aware of
possible safety concerns in the U.S. about CONUS-bound
Yemeni-origin LNG since at least June 2009, but only now have
become extremely worried about the political and commercial
fallout of Yemen-origin LNG shipments. YLNG Commercial and
Shipping Manager Jean-Pierre Cave (please protect) called the
possibility of a YLNG cargo being blocked from a U.S. port
"nothing short of disastrous" for the company's finances in
the near term and its relations with the ROYG in the long
term. YLNG Deputy Head of Sales Olivier Jouny (please
protect) told EconOff that "it would be nearly impossible to
renegotiate our contract and divert our U.S. cargos for 2010
to other destinations. We'll probably have to write it off
as a loss." (Note: According to Post calculations using data
from the ROYG Ministry of Finance, the ROYG will eventually
receive approximately USD 470 million per year in direct
revenue from LNG exports, or roughly USD 134 million for the
GDF Suez portion of production. End Note.) YLNG management
implored EconOff to have the U.S. Government keep any
eventual decision to block YLNG cargos from a CONUS port very
quiet. Any such decision should be framed as a local, not a
national decision, and should be ideally announced, if
necessary, as a cargo diversion for any reason other than
national security in order to protect YLNG's commercial
shipping reputation with its other clients, Cave told EconOff.
4. (SBU) According to Cave (please protect), the schedule for
the arrival of YLNG shipments to the U.S. for the first
quarter of 2010 is as follows:
-- January 31, 2010 (Sabine Pass, Texas)
-- February 17, 2010 (Everett Terminal, Massachusetts)
-- March 9, 2010 (Sabine Pass, Texas)
-- March 25, 2010 (Sabine Pass, Texas)
-- April 6, 2010 (Everett Terminal, Massachusetts)
SECHE