Saudi Grant to Yemen: Oil Derivatives, Power Sustainability Program

A Saudi grant to Yemen, recently announced by Crown Prince Mohammed bin Salman during a phone call with Yemeni President Abd Rabbu Mansour Hadi, would provide oil derivatives worth USD 422 million through the Saudi Program for the Development and Reconstruction of Yemen (SPDRY).

The new grant will not be limited to lighting homes and stores, but establishes a broader concept that guarantees the development of a qualified and sustainable electricity sector.

Anwar Kalashat, Yemeni Minister of Electricity, told Asharq Al-Awsat that the estimated fuel grant would represent “the difference in the price of electricity fuel that will be guaranteed by the Saudi government.”

He explained: “We buy fuel from Saudi Arabia at the local market price plus the 15 percent VAT and the costs of shipping to the port of Aden, while the Saudi government pays the price difference.”

The SPDRY has set up a strategy to raise the capabilities of the government and electricity institutions, to combat corruption, and to ensure transparency and the participation of the various sectors through the following mechanism: the Yemeni government pays the value of oil derivatives at local prices, which represent 25 percent of the global market value, and the Kingdom covers the price difference that exceeds 75 percent.

An electronic platform was launched to clarify the ongoing procedure, operation and revenue collection, for the purpose of transparency.

The Saudi program will also work with Yemeni authorities to develop plans aimed at raising the production capacity of power stations by relying on gas or solar energy.

Kalashat said his country has ordered 54,000 tons of diesel and 25,000 tons of fuel oil as the first batch, with an estimated value of USD 10 million dollars, which the Yemeni government settled in advance with the value-added tax.

“This amount was paid to the SPDRY and will be transferred to Aramco,” the minister added. “The shipping costs will be borne by the Yemeni government, while the difference in the global price will be paid by Saudi Arabia.”

Kalashat continued: “We, as a government, are keen to ensure that the fuel is distributed to the stations in a transparent manner and is utilized properly. We also want to be honest with our people and our brothers in Saudi Arabia and make sure that the grant has reached its beneficiaries.”

The minister underlined the need to improve the electricity service in the future and create strategic solutions to replace the costly diesel.

He added that the government would work on a plan to make use of the Saudi grant to achieve clear and visible reforms in the electricity sector.

“The support cannot last forever as it is provided for a year within a financial ceiling of USD 422 million dollars… Then, we should rely on ourselves and enable the institution to be sustainable in the future,” he stressed.