Comparison of Yemen LNG to Natural Gas Companies in Qatar, Saudi Arabia & UAE.

Yemen LNG was formed in the year 1995. However, due to the economic conditions in Asia this project was finally launched only in 2005. This research aims to identify the issues in implementing strategies in Yemen LNG; this study also aims to compare Yemen LNGs strategy to other companies dealing in natural gas. The companies the research is aiming at are located in Qatar, Saudi Arabia & UAE. The primary purpose of this research study will be to find similarities and differences and to recognize common resources and people problems Yemen LNG may face while trying to implement their strategy. This purpose of research will be achieved by means of secondary research primarily as all the government data and technical information needs to be accessed. This proposal is the first step of a dissertation that will be conducted to achieve the aims of this study.

Key Words: Yemen LNG, Natural Gas Companies, Saudi Arabia, Qatar, UAE. (2009;2700 words)

Introduction to Yemen LNG Natural gas is a naturally occurring hydrocarbon mixture found throughout the world. It contains mostly methane usually more than 90 percent and other hydrocarbon, such as ethane, propane and butane as well as inert gases, water vapor and trace compounds. Liquefied Natural Gas (LNG) is natural gas that is condensed into a liquid under high pressure by reducing it to temperature below -150oC. LNG is mainly used for transporting to various markets around the world. It is liquefied and transported; thereafter which it is regasified and sent for distribution. The LNG business is a highly volatile and complex business which due to its high risk and globalized nature contains many challeneges inherently. There has been a growing trend of deregulation in the worldwide markets, making it easier for companies to trade in the global LNG market, increasing trade opportunities. LNG has been traditionally concentrated in the developed countries with Europe and USA leading the way in importing it. However, due to drop in production in these places along with a general increase in oil prices energy security has become something of a major concern to countires across the world. The scarce availability of LNG in developed nations lead to major oil firms , backed by governments, to invest a lot of money into building LNG capabilities throughout the world. These investments have been concentrated particularly in the Middle Eastern regions as well as Africa. It is expected that worldwide LNG trade would significantly increase over the next 20 years from the existing 150 millions tonnes/year (tpy) to in excess of 200 million tpy. This increase would result from increasing world demand for clean burning fuel, particularly in regions where local production is insufficient such as US ad North West Europe creating a requirement to import long haul gas. BP carried out a statistical review of the world energy reserves and the figure below shows the energy reserves of natural gas around the world. It can be clearly seen that Middle East controls the production and is central to the world when it comes to natural gas reserves.

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The next figure shows the distribution figures of the world natural gas and it can be clearly seen that the share in the Middle East has clearly gone up significantly. This brings us to Yemen LNG, which is a small but growingly significant part of the Middle East gas business. Although its reserves only amount to 0.3 % of the world share, it still has interested all major oil corporations of the world so much so that Total Oil owns a majority shareholding within the company along with several Korean and an American firm. Yemen LNG is located at BalHaf, on the country's south coast. The plant has been designed to produce LNG with a high heating value of 1,080 BTU per standard cubic foot, suiting both the American demand for very lean gas and the Korean need for highly rich supplies. The plant is expected to produce 6.9 million tonnes a year (t/y) from two trains of 3.45 million t/y, while guaranteed capacity is 6.7 million t/y. Heads of agreement (HoAs) have been signed with Korea Gas Company (Kogas) for 1.3 million-2 million t/y and with Belgium's Tractebel for 2.5 million t/y, the latter to be sold into the American market. All these facts and figures do not hide the fact that Yemen is still an extremely challenging place to do business, as the one has to negotiate with the government, the local tribes and other powerful factions within the region. However, with a recent shipment to South Korea things have started to look up for the company. Its reserves are projected to exhaust by 2020, so Yemen LNG needs to figure out a way to best utilize its reserves whilst planning a strategy for any future investments. Research Questions Looking at the problems of implementing strategy of Yemen LNG by also making a comparison with Natural Gas companies in Qatar, Saudi Arabia and UAE. The research will look into the implementation issues that are faced by Yemen LNG in order to implement their strategy. The research questions are as mentioned below:

1) What are the main strategy implementation issues that Yemen LNG needs to be aware of? 2) What will be the resource and people related concerns that Yemen LNG will have to face? Objectives The main objectives of this research are: 1. To identify general issues related to strategy implementation for Yemen LNG. 2. To compare Yemen LNG strategy with other natural gas companies in the Middle East to find similarities and differences. 3. To identify the most common resource and people problems that Yemen LNG might face whilst implementing their strategy. Literature review Obstacles to strategy execution Once a strategy is thought of, sought after and agreed upon, one needs to move onto the next stage the strategy implementation within the planning cycle. Strategy implementation is one of the most crucial aspects and one cannot overestimate the importance of getting it right in order to achieve overall success. Hrebiniak (2005) suggests that strategy implementation is a set of interrelated activities that is the bridge between making a strategy and then making it work. There have been many reports and studies that have shown that the gap between strategy on paper and actually executing it is quite wide (Kaplan and Norton (2005), Mankins and Steele (2005), Johnson (2004)). Many of these studies also suggest that most of the corporate strategy does not even get implemented due to a host of reasons including people, processes, resources etc. This suggests a gap between strategy and performance and one will explore this avenue in order to identify the general issues that Yemen LNG might have to face to implement their strategy.

Beer and Eisenstat (2000) had conducted a thorough research into the silent killers of strategy execution and implementation in the business world- silent killers was referred to the hidden beneath the surface problems that completely hinder implementation of strategy. They further pointed out that these six killers in business are; 1. A top down approach to management 2. An incomprehensible strategy with conflicting priorities. 3. Ineffective senior management 4. Bad communication style 5. Negligible cross-functional cooperation 6. Insufficient leadership development. A top down or laissez faire management style means that senior management does not listen to its team when it comes to company strategy and how it should be moved ahead. Many a senior managers think that they know best and their pre formed opinions colours the direction that the execution of strategy can take resulting in conflict and obstacles. An unclear strategy too is a huge problem as they inevitably lead to priorities that are utterly conflicting resulting in either a crunch of resources or just too many processes wanting the same resources at any given time. The problem of resources will be touched upon later.

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As the figure suggests, that all the six killers are linked to one another. However, an ineffective senior management team is such a big problem at any stage of planning, particularly so during execution. This is as execution entails a barrage of cross-functional activities and a lack of coordination between functions can make execution very challenging. Generally ineffective senior management includes a poor communication structure through the company and/or a functional approach within the organisation. others is exactly the sort of approach that kills strategy execution. Hrebiank (2005) focuses on two other issues as well those are worth mentioning when it comes to strategy execution being faulty. Hrebiank (2005) states that most managers are well versed with strategy planning and formulation. Most of the business study, that schools managers, is geared towards one thinking about strategy planning and not execution. Managers are in a way left on their own to learn about strategy execution by trial and error. A narrow focus on the benefits that strategy is bringing to a particular function vis--vis

Furthermore, a second very valid reason is that many managers think of strategy execution as below them. Many managers believe it is they who plan and formulate strategy but the actual work is for their subordinates. Add to this a very large multinational firm and an all-pervasive attitude of side stepping execution and one can see the problems in strategy execution. Executing a strategy Bonoma and Crittenden (1988) are of the opinion that implementing a strategy generally consists of two main variables, structures and managerial skills. By structure they mean a framework in which a company can effectively operate. Managerial skills, as the previous section showed, are extremely crucial whilst planning to execute strategy, and includes those behaviours that managers actively engage in within the structures developed by the organization. Thompson, Gamble, and Strickland (2006) suggest that managerial skills are those skills that are needed by managers in order to execute management tasks within strategy implementation. Research has been conducted at various levels and consistent with it there have been eight levers, that facilitate strategy implementation within a company. These are divided into four structures and four managerial skills. Using these one can achieve better strategy implementation. 1. Actionsthis is about the framework needed for cross-functional collaboration, including who will be involved, when it will be involved etc. 2. Programsto instill organizational learning and practices as such. 3. Systemsit is about creating an environment where the right people can creatively achieve different things for the organization. 4. Policiesthese include a set of day-to-day guidance and policies for managers. The various managerial behaviour or skills are: 5. Interactingmanagers need to be able to solve conflicts, direct, lead teams and this skill is vital for strategy implementation.

6. Allocatingunderstanding where to place resources 7. Monitoringits an important aspect to motivate people, using better reward systems. 8. Organizingto create a strong corporate culture that helps the organization to move forward. Yemen LNG in the Middle Eastern region As discussed in the introduction Yemen LNG, majority of which is owned by Total, has reserves of natural gas but its miniscule compared to its rivals Qatar Gas. Therein lies a problem for Yemen LNG that is still a small fish in a very difficult, volatile and complex market. In order for it to survive it needs to go all out to secure new business from everywhere possible. Its latest shipment of 4 million cubic feet of LNG to South Korea is a start in the right direction. Yemen LNG is also building a new LNG plant at Balhaf, which shows a serious investment into the future. However, the problems with Yemen LNG emanate from the socio political structure of the country. It is a country where many powerful tribes exist that have serious political clout and force the government to do many things. The need to win them over is crucial and that is a major factor to be considered whilst executing strategy (zawya.com 2009). One also needs to think about the risk vs. reward whilst implementing strategy for Yemen LNG. It is clear that there are some major risks to be taken, but the resultant reward is also high. Statistics show that once the plant is up and ready it will be able to produce 6.7 million barrels of gas annually which will be equivalent to 180,000 barrels per day. This could bring around 30-50 billion USD in around 20 years for the company (zawya.com 2009).

Research Methodology

The aim of this research will be to identify the general issues related to the implementation of various strategies in Yemen LNG, to compare Yemen LNGs strategy to other companies dealing in natural gas in the Middle East in order to find similarities and differences and to recognise common resources and people problems Yemen LNG may face while trying to implement their strategy. As this research aims to looking at the problems of implementing strategy of Yemen LNG by making a comparison with Natural Gas companies in Qatar, Saudi Arabia and UAE, therefore, a study of the economic conditions, including the national currency, the position of the currency in the International market, etc. of these countries would be vital to this research. This research will identify the main strategy implementation issues that Yemen LNG needs to be aware of and the resource and people related concerns that Yemen LNG will have to face in order to achieve this. Hence, information on the economic growth of these countries will be crucial for this research study. The breakup of imports/exports, production of agricultural product, industrial product, etc. would help the researcher to evaluate the position of these countries in comparison to the International scenario. In addition, to understand the business environment of these countries, the reports published by World Bank would be beneficial with an aim to conduct a comparative analysis. Owing to the fact that LNG has distinct features as a product, a research on LNG will be crucial for this research study. Also, technical information on Yemen LNG and the Natural Gas plants in Qatar and Saudi Arabia would help the researcher to comprehend the capacity together with possible issues related to them. A large number of sources including technical journals on LNG may be used to obtain necessary information for this research study.

Data Collection

A secondary research will be conducted for the purpose of this research study. Secondary data will be collected, which will include both raw data and published summaries. A large number of companies like to keep a database or a collection of data so as to support their operations and this will prove extremely beneficial for this research as detailed information would be required on companies in Yemen and the Middle East. Saunders et al. (2000), argues that, For certain types of research projects, such as those requiring national or international comparisons, secondary data will probably provide the main source to answer your research questions and to address your objectives (Rocw.raifoundation.org 2009). The secondary sources from which the researcher intends to collect information are national and international journals, articles from libraries, online journals from databases such as Sage, Emerald, etc., books, websites (the world wide web), government documents, official statistics, technical reports, other scholarly journals, trade journals, review articles, reference books, research institutions, universities, search engines, computerized databases, etc. (Shell 1997). Other information necessary for the research would be accessible from the surveys published by the Government of Yemen, Qatar, Saudi Arabia and UAE. The location of these countries is significant to the research and hence a detailed geographical description of these countries will also be discussed as a part of this study together with information on political parties and their activities. Such information may be collected from various political publications of the country. Past records and historical information will be vital for this research study. Secondary data would include qualitative and quantitative data. Researchers classify secondary data in many forms (Kelly 2005). Secondary data can be divided into three kinds of data, namely, documentary data, survey based data and data that has been collected from various sources. Documentary data may include various sources including journals, newspapers, books, articles in magazines, etc. Whereas, survey based data is related to data that

has been collected by means of a survey or a questionnaire. Survey based data can be organisation, people or household specific as it is collected especially for the purpose of research (Hakim 1982). Timeline of the study

Week 1

Conceptualization of topic, Research Problem and Objectives of study

Week 2 Week 3 Week 4

Questionnaire Design and Testing Questionnaire Survey Survey Completion and Preparation for Analysis

Week 5 Week 6

Analysis and Report Writing Completion of Research Project and Submission

Possible Limitations of the research Owing to the fact that this research is a comparative study on Yemen LNG and Natural Gas companies in Qatar and Saudi Arabia, getting access to Government documents in order to conduct an extensive research may be a cause for concern. For a comparative study aiming to look at more than one country, time will always be a significant limitation.

References

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Bonoma, T. V., & Crittenden, V. L. (1988). Managing marketing implementation. Sloan Management Review, 29(2), 714.

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http://www.rocw.raifoundation.org/management/bba/MarketingResearc h/lecture-notes/lecture-21.pdf [Online] [Accessed 19th March 2009]. Shell, L.W. (1997). Secondary Data Sources: Library Search Engines, Nicholls State University. Thompson, A. A., Gamble, J. E., & Strickland, A. J. (2006). Strategy: Winning in the marketplace (2nd ed.). Burr Ridge IL: McGraw-Hill/Irwin. Zawya.com G%20Windfall [Online].[Accessed 22nd Mrch 2009]. (2009).

http://www.zawya.com/story.cfm/sidANA20090315T030548ZPFK46/LN