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Yemen accord signals first step towards restarting LNG

A UN-brokered deal to bolster the ceasefire around the port of Hodeida improves chances of ending the four-year-old conflict

UN officials have secured an agreement from the internationally-recognised Yemeni government and Houthi rebels to reinforce their shaky ceasefire around the Red Sea port city of Hodeida, a vital entry point for food and humanitarian aid.

The day when international oil companies (IOCs) return to Yemen in any numbersand the Yemen LNG plant at Balhaf resumes productionis probably still distant. But IOCs waiting on the side-lines will be encouraged by recent developments, which suggest a small shift towards the warring parties agreeing to lay down arms.

The accord includes a commitment to withdraw forcesalthough previous commitments have not been honoured. The UN Security Council extended the mandate of mission to monitor the Hodeida ceasefire for six months.

Balhaf output (6.7m t/yr capacity from two trains) was halted in April 2015, weeks after the start of the conflict. The site is undamaged so production could resume relatively quickly once the supply of gas to the plant is secured and personnel are able to return. Total holds a 39pc share in Yemen LNG.

Yemen was a declining oil producer even before the conflict, averaging just 127,000bl/d during 2014, but OMV and Medco of Indonesia remain operating in the country and the government hopes other firms will join them.

UAE pulls back

Another positive move was the decision of the United Arab Emirates (UAE) to reduce the size of its military force deployed in Yemen. The UAE has taken the lead in assisting units of the Yemeni army loyal to the government while Saudi Arabia has taken the lead in air strikes.

The UAE stated it intends to leave some units in Yemen to train local forces. But the Abu Dhabi-based authorities have strongly given the impression that the war has become too costly, both in economic terms and in loss of life.

These events do not add up to an end to the war coming into view. But if civil wars endin the absence of a clear winnerwhen the various parties run out of energy, perhaps at least the first signs of fatigue are starting to appear.

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