Yemen: Safer CEO Outlines Plans for Shale & CNG — Political Circumstances Permitting

What happened: Safer CEO Salim Kaati announced the ROYG-owned company was exploring several new projects, including shale oil, that would require specialized international expertise to develop.

Why it matters: As a Saudi-backed reorganization has put some momentum behind the ROYG, Kaati’s statements were among the first positive signs in the Yemeni hydrocarbon sector in years, with the CEO clearly pitching to international investors.

What happens next: With the Houthis again rattling their sabers over Yemen’s hydrocarbon wealth, committing to Yemen before a peace agreement is signed would be premature. However, the promising trends do merit increased exploratory engagement.

On 22 June, Safer CEO Salim Kaati (see Featured Personality) stated that his Yemeni government (ROYG) oil company is technically prepared to resume LNG production and exports whenever political conditions permit. He also announced that Safer was examining several new projects — including compressed natural gas (CNG) production and shale oil — that would require assistance from international companies.

Kaati’s remarks come amid the ROYG’s reform push following Saudi Arabia’s ouster of the UAE early this year. They also provide the first inkling of momentum in Yemen’s hydrocarbon sector in years. With Riyadh currently spending heavily to keep the Yemeni government afloat, we expect strong Saudi backing for oil and gas projects that can generate revenue for the ROYG.

However, familiar challenges should give investors pause. The Houthis’ post-2022 blockade on hydrocarbon exports remains in place; on cue, the Houthi leadership began threatening in mid-June to act against Saudi control of Yemen’s hydrocarbon wealth. While we view this rhetoric as a pressure tactic in peace talks toward a final peace deal, we advise investors to be wary of potential export-oriented projects that would become immediate Houthi military targets.

That said, investors looking to get an early foot in the door ahead of a potential peace deal could consider engaging on some of Safer’s proposed domestic projects, with preliminary shale exploration studies a relatively low-risk, potentially high-reward activity that could build trust with Safer without triggering Houthi retaliation.

Ending Yemen’s Lost Decade?

Kaati’s comments came after a decade of war had ravaged the Yemeni hydrocarbon sector. Development of Yemen’s most important pre-war prospect — LNG produced in Marib and exported via the Balhaf LNG terminal — has been offline since force majeure was declared in 2015. While oil exports resumed in the mid-2010s, a Houthi blockade halted them in 2022, prompting international operators to withdraw.

The first suggestion that this status quo could change came with Saudi Arabia’s early 2026 expulsion of the UAE from Yemen. UAE-backed anti-ROYG forces’ control of the Balhaf terminal was previously viewed as an obstacle to resuming LNG exports from ROYG-held Marib. But Saudi Arabia’s consolidation of security control put the entirety of Yemen’s LNG export infrastructure under a single party’s control for the first time in years.

The expulsion also lit a fire under Riyadh to resume exports. The impetus is largely financial: the cash-strapped ROYG was historically dependent on hydrocarbon exports for 70% of its revenues, and today Saudi Arabia is hemorrhaging money to uphold its financial commitments to the reform-minded ROYG and cover an expanded militia bill, which now includes formerly UAE-backed armed groups. All this is leaving the Kingdom — which is already contending with the financial pressures of the Iran war — increasingly stretched, focusing its interest on resuming and expanding hydrocarbon exports to offset its obligations.

Kaati’s 22 June interview, which he gave to Riyadh-aligned Asharq al-Awsat, appears to be part of a campaign toward this end. In addition to stating that Safer was prepared to gradually resume LPG exports once political conditions permit, he discussed plans for several new projects, including the development of CNG and shale oil exploration. He noted that preliminary studies by SLB had uncovered indicators of significant shale reserves, stressing that further exploitation would require partnership with specialized international companies.

Fracking a Promising Minefield

We view Kaati’s interview as a promising signal from a sector that has seen few positive developments in over a decade. Moreover, the fact that Riyadh is advertising potential prospects in international English-language publications could be taken as an indirect signal that it intends to pursue a Saudi-Houthi deal permitting a resumption of hydrocarbon exports in the mid-term, now that the delays caused by the Gaza and Iran wars and Saudi-Emirati rift have subsided.

Nevertheless, familiar challenges should give investors caution before they jump wholeheartedly back into Yemen. The Houthi blockade remains firmly in place; on 15 June, Abd al-Malik al-Houthi gave a speech condemning Saudi control of Yemen’s oil and gas resources and outlining his group’s plan to “seize” back Yemen’s sovereignty.

We see Abd al-Malik’s statement as more posturing ahead of peace talks than a threat to return to war. However, the Houthis have sufficient drone and missile capabilities to target any infrastructure in Yemen, and would likely strike any new foreign project to export oil and gas — at least unless they receive a cut of the proceeds. As such, we advise investors to avoid committing to any large-scale infrastructure until a peace deal is reached.

However, ambitious investors hoping to get an early foot in the door in post-war Yemen could begin initial engagements with far less risk. The Houthis would likely not target projects aimed at the Yemeni market, such as a CNG network. Furthermore, exploratory missions aimed at confirming Safer’s claimed shale deposits would likely be discreet enough to avoid attack.