Longform

Yemengate

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When Arabian Shield challenged the authenticity of the signatures, Hunt Oil produced two more affidavits, not from Al-Bahr but from two other Yemeni officials. Each said they knew what Al-Bahr's signature looks like and felt the challenged signatures were authentic. Al-Bahr was dumped as Yemen's oil minister in 1985.

After their lawsuit was thrown out of court, El-Khalidi and Arabian Shield were stymied in efforts to continue seeking evidence against Hunt Oil.

But events in Yemen have conspired to revive the allegations in that country, with El-Khalidi's help, and suspicious journalists are now trumpeting new charges about the way Hunt Oil has dealt with the country.

Operating in Yemen has never been a cakewalk for Hunt Oil or any of the companies that have since drilled in other parts of the country. Fights still break out between competing tribes. Several times Hunt workers have been kidnaped, although all have ultimately been released unharmed.

In 1990, North and South Yemen decided to merge into one country. With the downfall of the Soviet Union, South Yemen's economy was going to hell and it needed friends.

But the newly reunited Yemen, with an estimated population of 12 million, was not peaceful. The southern socialists and northern power brokers tried to get along, but there was constant friction. Civil war broke out in 1994. Northern forces prevailed, and most of the southern leaders were forced to acquiesce or flee the country.

Through it all, Hunt Oil has managed to continue operating, pumping about 200,000 barrels of oil per day. Hunt spokesman Jim Oberwetter says that is because the company resolutely stays out of Yemeni politics.

"We've operated there since 1981, and we've operated successfully there through the Persian Gulf War and recently the Yemen civil war," Oberwetter says. "What we have avoided in Yemen, which I believe is part of the reason we are successful, is politics. We've stayed out of it, and will not be drawn into it."

Like it or not, Hunt Oil is being drawn into it.
The allegations leveled in the aborted Arabian Shield lawsuit are now just part of the basis for newspapers to go after Hunt Oil.

Whether it got the oil contract legitimateR>ly or not, the company is being accused by newspapers, and at least one former Yemeni official, of caring more about its profits than the welfare of Yemen, or the promises it made to that country when it won the oil rights.

The turmoil has been bubbling since last September, when reports first surfaced that Hunt Oil was in the bidding to develop the natural gas from the Ma'rib field.

According to Middle Eastern newspaper reports, Hunt tried to scare off other competitors for the natural gas contract by claiming it already had rights to the gas, and threatening lawsuits against other suitors.

"Mr. Bafadel [Yemen's minister of supplies and trade] said that Hunt Oil is committing non-ethical acts in interfering in the investment policies of Yemen," the Cairo newspaper Al Alam Alyoum reported last September. "[Hunt is] sending all companies interested in investment in Yemen threatening letters warning such companies of presenting any offers by presenting itself as the owner of the concession in this vital and important project."

At the time, the main challenge to Hunt for the natural gas project was from Houston-based Enron. An internal Yemeni government memo in August 1994 concluded that Enron's proposal was most favorable to Yemen, but noted that Hunt Oil and Exxon, its partner, were "threatening Enron Company and other companies which voiced interest in participating in the project with legal action against them."

A translation of the memo, written by Minister of Petroleum and Mineral Resources Shamlan, shows that it castigates Hunt Oil's behavior and recommends that the company not be awarded a share of the natural gas concession.

"Because of previous actions of Hunt/Exxon which are full of mistakes and violations, this Ministry concludes that entering into an agreement with Hunt is not acceptable, and will produce many problems," the memo says.

Shamlan then laid out some of the "previous actions" by Hunt Oil that have outraged Yemeni officials.

A 1989 audit of Hunt Oil's books by Touche Ross, the memo says, "indicated violations of $140 million in the expenses of (Hunt) for the period preceding 1989." The government ultimately received $9 million from Hunt Oil to settle the claim that it had jacked up its expenses to avoid sharing profits with the government.

The executive summary of a later Touche Ross audit, dated March 1994, contends that Hunt Oil racked up another $102 million in questionable expenses after 1989. There is no indication whether that amount remains in dispute.

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David Pasztor

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