Some Yemen Oil Exports Continue Amid Strife

By ALEXIS FLYNN

LONDON, Mar 24, 2011- At least some oil and natural gas continued to flow from Yemen to customers abroad Thursday, despite an escalation in unrest and what opposition groups warned was an increasing threat of civil war in the Middle Eastern country.

However, the worsening political crisis, along with ongoing conflict in Libya and throughout the North Africa-Middle East region, looked increasingly certain to lend continued upward support to oil prices. Yemen accounts for a small percentage of oil, but the country's strategic locale near Saudi Arabia has injected additional anxiety into markets.

There have been conflicting signs on the impact of the unrest on oil and gas operations.

On Wednesday, Canadian producer Calvalley Petroleum Inc. said a pipeline that ships 50,000 to 70,000 barrels of oil a day from Yemen's western oil fields to the port city of Ras Isa on the Red Sea has been shut down in a recent tribal attack.

Austrian oil company OMV AG said it had shut all its production in Yemen. OMV's normal Yemen production of 6,600 barrels of oil equivalent a day has been stopped since March 18, because of a rebel attack on the country's main export oil pipeline.

"We do not produce oil at the Haban field at the moment. It is shut, which means that at the moment we have no production in Yemen at all," OMV spokesman Sven Pusswald said in a written statement. OMV has also begun evacuating all 60 of its expatriate staff based in Yemen, Mr. Pusswald said.

But a Yemen government official who asked not to be identified said Yemen's oil exports won't be affected by an attack that shut down a pipeline carrying crude from the country's western fields.

Also Thursday, French utility giant GDF Suez SA said it is continuing to receive liquified natural gas shipments as normal from Yemen. "As of today, all deliveries took place as normal," a GDF Suez spokesperson said Thursday morning.

Norway's DNO International ASA , which has also evacuated staff from Yemen, confirmed Thursday that it continued to produce oil and gas in Yemen.

French major Total SA, one of the bigger players in Yemen, declined to comment on production but said through a spokesperson that "all necessary measures are taken to guarantee our employees' safety, as this is our highest priority."

A Total executive told a French petroleum magazine this week that a pipeline outage could affect Total's Yemen LNG plant.

Although Yemen, the Arabian Peninsular's southernmost nation, accounts for a relatively nominal 260,000 barrels a day, well under 1% of world output, the country's strategic location means events there could have wider regional implications, specifically for northern neighbor Saudi Arabia and Bahrain.

Fears of regional spillover, with a resulting interruption to production in those countries, pushed the price of crude oil higher late Thursday.

At 1541 GMT, the front-month May Brent contract ICE futures exchange traded 29 cents higher at $115.84 a barrel.

However, some observers suggested these fears of contagion were overblown.

"At the heart of so much of the worry over recent events in the region is the possibility that the 'unrest' could eventually spread to Saudi Arabia. At this time, that does not look all that likely or imminent," said Peter Beutel of oil-trading advisor Cameron Hanover, in a research report.

Source: The Wall Street Journal