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Yemen's oil recovery thwarted by continued conflict

An attack on an oil pipeline in government-held south of the country underlines the dire predicament of its energy sector

It seems things can't get any worse and then they do. Yemen was a bankrupt nation before the most recent descent into violence. Oil and natural gas offered at least a limited lifeline, but now that's as good as gone. In the early years of this century oil production reached 424,000 barrels a day. Today it's barely a trickle.

While the latest attack on an oil pipeline, in Shabwa province in southern Yemen, won't directly impact the ailing energy sector, it will send yet another negative message to foreign firms thinking of returning to Yemen or investing there in the future. The south is nominally under government control, but it's clear that lawlessness hasn't been eliminated and al-Qaida remains a potent force there.

The Yemen conflict, which has seen a Saudi-led Arab coalition seek to defeat a rebellion by Shia Houthis and the forces of former president Ali Abdullah Salih, has crippled almost the whole energy sector, with IOC personnel long since departed. There was hope in 2016 when forces loyal to the internationally recognised leader of Yemen, President Abd Rabbou Mansour Hadi, recaptured the southern coastal city of Mukalla, which had been under al-Qaida control for a year.

They also retook the oil exporting terminal of Al-Shihr, 40 miles to the east of Mukalla. Before the Houthi uprising began, Al-Shihr was handling up to 80% of Yemeni oil exports. The expulsion of al-Qaida fighters from Mukalla and other coastal areas of Hadhramaut enabled limited production to resume from oil fields in the Masila Basin. Small volumes of oil have been exported from Al-Shihr since then.

The two main Masila fields are in Block 10 (East Shabwa) and Block 14 (Masila). The former was operated by Total until December 2015 before being handed over to a state-owned Yemeni company, PetroMasila. Production from East Shabwa was running at 31,000 b/d in 2014, but halted later in the year as the fighting in the country spread. PetroMasila is also the operator of the Masila Block, where production was averaging close to 40,000 b/d in 2014. At present, production from the Masila Basin—and from the whole of Yemen for that matter—is estimated in the region of 30,000 b/d.

Yemen's gas sector isn't faring any better. Paralysed but undamaged is the Belhaf liquefied natural gas plant on the southern coast. The expectation is that no gas will flow again from the Marib field in central Yemen to the Total-operated plant before 2020 at the earliest.

In short, Yemen's energy sector is in poor shape to fund the reconstruction of the country when the conflictwhich has brought death, famine and cholera to the population—eventually comes to an end.

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