In July 1984, the Hunt Oil Company announced it had struck oil in the Yemen Arab Republic. Tests so far suggest that the field will produce a minimum of 75,000 barrels per day (b/d). This would be the threshold for commercial exploitation, given the field’s location nearly 500 kilometers inland and separation from the coast by a 10,000 foot high mountain range. By some estimates, the field has a potential of 300,000 b/d, a considerable margin for export over North Yemen’s present consumption of 17,000 b/d.
North Yemen’s potential entry as an exporter of oil to the world market offers the prospect of foreign exchange revenues that would supplant the important role of emigrant worker remittances in the Yemeni economy over the past decade. This development also holds some potential for modifying the financial leverage which Saudi Arabia has had over Yemeni affairs ever since the revolution of 1962. For this reason, the Saudis are probably less than thrilled with the news of the Hunt discovery.
The newly discovered field lies close to North Yemen’s border with Saudi Arabia and South Yemen, in the desolate and remote Marib basin. The Saudis have no need for another oil field themselves, and would likely prove difficult in any negotiations that might be necessary over Saudi claims to oil that may lie on its side of the disputed border. It is more likely, though, that the field extends into the territory of the People’s Democratic Republic of Yemen, and here the prospects for cooperation are more promising. A Russian drilling crew has discovered some oil in an area some 60 to 70 kilometers south of the border, and the question of cooperation has reportedly been on the agenda of regular meetings between Sanaa and Aden. Precisely this prospect of closer economic cooperation between the two Yemens represents still another threat to Saudi leverage over the North.
There have apparently been sporadic border clashes along the ill-defined Saudi-Yemeni border in this Marib region as well as further to the north, a result of North Yemen’s efforts to control endemic smuggling. Sometime in late 1983 or early 1984, there was a series of incidents apparently sparked when North Yemeni armed forces pursued smugglers across the border and encountered troops on the Saudi side — mostly Pakistani mercenaries, according to Yemenis. Between 80 and 200 men were reportedly killed or wounded.
Goods smuggled into North Yemen range from fresh fruit (since the ban on imports in October 1983) to cars and gasoline, and are valued at around $1 billion per year. Saudi imports across the border include alcohol, arms and, recently, wheat. Wheat costing $160 per ton in Hudayda can be marketed at the Saudi government support price of $1,000 per ton. There are reports that some of the grain now being smuggled has been diverted from food aid to Ethiopia and Somalia, across the Red Sea. North Yemen’s potential transformation from a labor exporter to an oil exporter is several years off under the best of circumstances. In order to raise the capital necessary for field and pipeline investments, Hunt has sold 24.5 percent of its interest in the YAR concession to a consortium of South Korean companies, which in turn will put up 49.5 percent of the $1 to $2 billion of development capital needed. The Korean companies will then have an inside track for pipelaying and other contracts.