Yemen LNG production halted

Yemen LNG Balhaf plant

Yemen LNG Balhaf plant

The UN imposed an arms embargo on Yemen’s Houthi rebels just hours after the foreign backers of a major gas export scheme halted all production and export operations and evacuated staff from its Balhaf plant as fighting approached the vital piece of the country’s economic infrastructure.

The UN Security Council’s resolution sanctioned Houthi supporters, including former president Ali Abdullah Saleh and his son, and demanded that all parties in the Yemeni conflict end violence and “resume and accelerate” UN-backed talks on a political transition.

As fighting continued on the ground, Yemen LNG — the country’s largest industrial investment — declared force majeure, stating that it could not meet its obligations amid reports of battles in the Shabwa province. Yemen LNG’s Balhaf export facilities are located on the Gulf of Aden coast of Shabwa.

Houthi rebels, who have been targeted by a three-week air campaign by Saudi Arabia after extending their control over the country, have made recent gains in the northern Shabwa region.

“Due to further degradation of the security situation in the vicinity of Balhaf, Yemen LNG has decided to stop all LNG producing and exporting operations and start evacuation of the site personnel,” the company said in a statement on Tuesday. “The plant will remain in a preservation mode.”

The force majeure declaration marks a further turning point in the complicated conflict in Yemen as Houthi rebels take on forces loyal to Abd Rabbu Hadi, the president who has fled to Riyadh in the face of rebel advances.

The rebels, backed by former president Saleh who was ousted in the Arab spring unrest of 2011, have continued to make gains in spite of nightly bombing raids targeting their forces and ammunition dumps.

The evacuation of the site came after tribes in Shabwa moved to secure the pipeline connecting a gasfield in the central province of Mareb with the Yemen LNG processing and export terminal on the south coast. The tribes also encircled the processing and export facility to prevent the Houthis, who on Sunday seized control of Ataq, the biggest town in Shabwa, from consolidating their control over both the province and its oil and gas resources.

The tribes initially seized control of an army barracks in the southern town of Azzan, which has historically provided security for the Yemen LNG complex, before surrounding the export facility.

The Houthis, backed by military units loyal to Mr Saleh, are also engaged in heavy fighting in Mareb province, which along with Shabwa is the site of the bulk of the country’s oil and gas resources.

The Houthis have struggled to gain ground in Mareb, where they have been met with stiff resistance from local tribes. “Right now the tribes’ priority is to secure Balhaf so that Houthis do not take over the [oil and] gasfields,” said a Yemeni analyst in close contact with tribal leaders in both Mareb and Shabwah.

A finance ministry official in Sana’a, the capital, said that revenues from oil and gas exports are still being transferred to the treasury which, like all government institutions, is under Houthi control.

Yemen LNG launched in 2005 with sufficient gas reserves to export 6.7m metric tonnes of LNG a year for the next 20 years. The company — which has Total, Hunt Oil, Korea Gas and Hyundai as shareholders — has long-term customers in North America and South Korea.

The supply chain includes a pipeline linking two gas processing units in the gasfields of Marib, as well as a 320km main pipeline that connects the fields to the liquefaction facilities at the Balhaf terminal on the coast.

There is also a spur line transporting domestic gas to the Ma’bar area of central Yemen, 75km south of the capital Sana’a.

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Source: Financial Times (Simeon Kerr/Peter Salisbury)
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