Oil minister: Yemen 'on the brink' of economic collapse

Yemen’s oil minister said his country is on the brink of an imminent economic collapse due to recurrent bomb attacks on oil pipelines and ongoing social unrest.

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, May 13 -- Yemen’s oil minister said his country is on the brink of an imminent economic collapse due to recurrent bomb attacks on oil pipelines and ongoing social unrest.

“Acts of sabotage on the oil pipeline in Wadi Ubaida in Marib province have hampered the flow of oil since mid-March and undermined the confidence of foreign investors in the country,” said Amir Salim Al-Aydarus.

Yemen is among the Arab countries swept up in protests against longtime rulers since the January revolt that ousted Tunisia’s ruler Zine El Abedine Ben Ali.

Yemen has likewise been wracked by antigovernment protests and clashes between demonstrators and security forces for many weeks, but Yemen’s long-serving President Ali Abdullah Saleh is determined to remain in office.

"The opposition want to destroy the Yemeni economy, but we will not allow them to do so,” Saleh said over national television. "All Yemenis must unite to stand against the crises," he said.

Opponents of the regime, including powerful tribes, appear to be attacking the country’s oil facilities in an effort disrupt the country's exports and force Saleh’s resignation.

Security officials have said the tribes, in addition to blowing up the country’s main export pipeline, have also blocked tanker trucks from moving through their territory.

“Several foreign oil companies have quit the country and the refineries in the southern province of Aden came to a standstill a week ago,” Al-Aydarus told members of the Yemeni parliament.

Oil, gas production affected
Austria’s OMV, which was exporting light crude out of the Ras Isa terminal, is reported to be among companies that have stopped producing out of Yemen following the pipeline blast.

Total SA's production in Yemen "has been affected," by the unrest and strikes, a Total spokesperson said, without giving exact details. Total produces both oil and natural gas, and it also holds exploration rights in Yemen.

In 2010, Yemen produced 260,000 b/d of crude oil. Around 110,000 bb/d of that production is light crude, which is in high demand globally following the loss of Libyan output in February.

Al-Aydarus also blamed the economic woes on the prolonged political deadlock between the country’s ruling party and the opposition, saying the ongoing political crisis has hastened the departure of foreign oil workers.

The minister also claimed that months-long street protests have adversely affected the distribution of oil products and added to the difficulties in repairing the damaged pipeline.

"The sabotage and destruction by outlaws on oil and gas pipelines as well as electricity lines exacerbated the economic situation," Al-Aydarus said. "If the problem persists, the government will be unable to meet the minimum needs of the citizens. The situation will pose a catastrophe beyond imagination."

Al-Aydarus’s remarks follow earlier statements by Yemeni officials that their country’s production has been halved and that negotiations are underway to import crude oil from neighboring Saudi Arabia.

“By importing crude oil, we would keep the Aden refinery going,” said a senior Yemeni official, adding, “The economics of it makes sense. It’s being discussed within the government.”

Meanwhile, Nexen Inc. of Calgary said its production and operations have resumed in Yemen following a 2-day labor strike. “Production is expected to be at pre-shutdown rates in the next few days,” Nexen said on May 11.

Last week, other reports said Calvalley Petroleum Inc., Calgary, in mid-May will begin shipping blended crude from all Block 9 fields in Yemen when a company-owned metering system begins operating.

Those shipments will include crude from Hiswah, Al Roidhat, and Ras Nowmah fields in the Masila basin. Calvalley’s blended crude will continue to receive the Masila blend price, which is benchmarked to Brent crude pricing (OGJ Online, May 6, 2011).

Contact Eric Watkins at hippalus@yahoo.com.

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