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Yemen considers military operation to repair pipeline

Anti-government protesters during a demonstration in the southern city of Taiz, Yemen June 28, 2011.

Khaled Abdullah/Reuters/Khaled Abdullah/Reuters

Yemen may launch a military operation to secure and repair its main oil pipeline which has been shut since a mid-March attack by local tribesmen, a senior Yemeni government official told Reuters on Tuesday.

The lack of crude flowing through the damaged pipeline forced the Aden refinery to halt output, triggering widespread fuel shortages and forcing the poorest Arab country to increase imports when it can least afford to.

A military operation is likely if local tribal leaders do not allow the government to repair the vital oil pipeline soon. "We're close to reaching either a deal or a crackdown," said the official, who declined to be named.

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"There is mediation, we have been in contact with them. But our patience is limited."

Yemen's main oil pipeline, which carries crude from the Marib oilfields, was halted after tribesmen demanding the departure of President Ali Abdullah Saleh attacked it.

The resulting loss of 110,000 barrels a day (bpd) of light and sweet Yemeni crude further tightened global supplies of easily-refined oil after light Libyan oil exports were stopped in February.

"There is commitment and belief in the top level of the government that this situation can't be sustained," the official said.

He declined to say exactly when the government would start the repairs but said the decision would be made "very soon."

The impoverished Arab state has been rocked by months of protests against Saleh's three-decade rule. Some generals have defected while Yemen faces a rebellion in the north, separatist violence in the south and a resurgent wing of al-Qaeda.

The 150,000 bpd Aden refinery closure has been a big economic blow.

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"When the Aden refinery is working, we're importing half of our needs," the official said. "Now, we're importing 100 per cent of our needs. This is a huge burden."

The small, non-OPEC oil producer also exports around 3 million barrels of oil per month from its Masila oilfield, which produces heavier crude.

"We get something like $300-million [U.S.]from that," the official said, adding that the loss in oil revenue was hitting public finances hard.

"Our budget is $7-billion for revenues and $10-billion in expenditures. There is a big shortage," he said.

"If we had our own refinery producing, at least it would have saved us from importing."

Top oil exporter Saudi Arabia has donated 3 million barrels of crude oil to Yemen and the first shipment was delivered to the Aden refinery in mid-June.

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But because it is a heavier grade of crude compared with light Marib, it is not enough to meet Yemen's daily need.

"That crude produces less than 30 per cent of our daily needs. We need 4,000 tonnes of gasoline daily and we can get 1,200 tonnes of gasoline out of that crude," he said.

"We still have to import the rest," he said, adding that Yemen was importing fuel from companies such as Vitol and Total as well as United Arab Emirates-based oil traders Fal Oil. Several Gulf-based traders have stopped supplying to Yemen because of payment problems. Shipping sources say there are several vessels at the port of Aden, waiting for payments to go through to be discharged.

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