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Yemen political struggle causes problems for energy sector

The seizure of power by Houthi fighters leaves the country and its energy sector close to collapse

Yemen's presence on the global energy scene has been fading for many years, but in 2015 there is a danger that it might disappear. The Houthi tribe’s seizure of the presidential palace in early February, after forcing President Abd Rabbuh Mansour Hadi and his government out of office the previous month, seems set to add significantly to the instability that had already forced some oil and gas installations to scale back operations or even halt them.

Yemen LNG in late January declared force majeure on deliveries from its 6.7 million tonnes a year capacity Balhaf plant, with some employees evacuated. Last December the Balhaf operator, France’s Total, received a threat from al-Qaida in the Arab Peninsula (Aqap) that the group regarded the company’s operations in Yemen as “legitimate targets”, alleging that drone strikes were being launched from their facilities. In late January a rocket struck the Balhaf export terminal but caused no casualties.

Two similar attacks were recorded in December. In a separate development, Nexen closed down its oil operations in Block 51 in Hadhramaut province after threats to the security of its employees.

Closedown

The pattern of oilfield operations in the west and centre of the country being suspended as a result of the Houthis battling their way eastward has expanded over recent weeks. OMV of Austria in Block S2 and Calvalley of Canada (Block 9) are among the international oil companies which have moved their employees to safety. The operations of state-owned Safer Petroleum (Block 18) and Kuwait Energy (Block 5) in Marib province have also faced disruptions for several weeks. 

Yemeni soldiers
Yemeni soldiers

Attacks on pipelines have been a feature of the energy sector for years. But their disruptive effect has been greatly compounded by the Houthis’ military expansion. Yemen’s oil production was running at 115,000 barrels a day (b/d) in December 2014, but dropped below 100,000 b/d in January and is expected to decline still further in the weeks ahead. 

Uncertainty clouds Yemen’s immediate future. Houthi proposals for a new governing structure include a five-member presidential council to be selected by an assembly that will replace the current parliament. But within hours of the announcement, crowds of protesters appeared in several cities saying they rejected the Houthis’ takeover.

Yemen looks likely to join Libya and Syria in the category of failed and disintegrating states

Tribal leaders in Marib province and elsewhere also say they will oppose the new leadership, a message echoed by supporters of southern secession. For its part, Aqap, which has been engaged in battles with the Houthis for many weeks, is certain to step up its resistance to the Shia group and its supporters. 

All this points towards the Houthis, a minority Shia group with several thousand supporters, facing considerable opposition, with little hope of many political groups agreeing to partner them in power. So Yemen must expect a turbulent period ahead. Having seized power after the failure of UN-brokered talks aimed at achieving a compromise political solution, the Houthis appear to be in no mood for further reconciliation moves: there seems no chance that they will heed UN, Gulf Cooperation Council (GCC) and other international calls for President Hadi to be restored to power.

Only a matter of months ago the UN and the GCC were hailing the transfer of power in Yemen as a model for other Arab states to follow. US President Obama last September described drone strikes against al-Qaida in Yemen, coordinated with the Yemeni military, as a successful example of US counterterrorism strategy. Now, short of some unimaginable turn of events, Yemen looks likely to join Libya and Syria in the category of failed and disintegrating states.

Against this background there can be scant hope of Yemeni oil and gas operations getting back to anything like normal for many months – even if a new central government emerges in Sanaa and the country’s energy sector management can get back to work.

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