Yemen LNG halts production, exports as fighting worsens security

By AARON CLARK and CHOU HUI HONG
Bloomberg

Yemen halted output and exports from the country’s sole liquefied natural gas (LNG) plant, citing security concerns, as clashes between Shiite Houthi rebels and a Saudi Arabia-led Sunni coalition in the country worsens.

Yemen LNG Co. declared force majeure, a legal clause meaning circumstances make it impossible to meet contractual obligations, according to an e-mailed statement Tuesday. Tribal fighters seized posts outside the city of Balhaf in southeastern Yemen near the plant after soldiers fled, said Abu Bakr al- Awlaki, a local resident who witnessed the clashes.

“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,” according to the statement. “The plant will remain in a preservation mode.”

Saudi Arabia is leading a coalition of predominantly Sunni Muslim nations against Shiite Houthi rebels in Yemen, saying the aim of the military campaign is to restore the legitimate government of President Abdurabuh Mansur Hadi and force the rebels to resume talks. Airstrikes against the Houthis and their allies began last month and the coalition has refused to rule out the deployment of ground troops.

Yemen LNG processes and exports gas from the Marib area and has two trains with a total capacity of 6.7 million tpy, according to the company’s website. The project has three long-term sales contracts with GDF Suez, Korea Gas Corp. and Total.

Spot Shipments

Total is the biggest shareholder in the project, with a stake of almost 40%, according to the website. Others include Hunt Oil Co. and SK Innovation Co., the website shows.

Yemen’s LNG output forms about 2.2% of the world’s total LNG liquefaction capacity of 298 million tons last year, according to data from the International Group of LNG Importers.

“It depends on how long the Yemen LNG plant shutdown lasts, but you wouldn’t expect it to have any significant impact on the market,” said Graeme Bethune, CEO of EnergyQuest. “The market is well supplied.”

Prices for spot LNG shipments delivered to Northeast Asia have plunged 52% over the past 12 months. In the following four to eight weeks they fell 6.5% to $7.15/MMBtu, the most in two months, New York-based Energy Intelligence said April 8 on the website of its World Gas Intelligence publication.

Rebels seized equipment including tanks from brigade headquarters and haven’t attacked the Yemen liquefied natural gas plant, according to the local resident al-Awlaki. More than 600 people have died and more than 2,000 people wounded during the clashes in the nation, according to United Nations Secretary-General Ban Ki-Moon.

Yemen’s location at the Bab el-Mandab, a key chokepoint in international shipping, makes it important for energy trade, according to the US government. More than 3.4 million bpd of oil passed through the waterway in 2013, according to the US.

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