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Oil Major Backs Away from Yemen, Citing Security Concerns

Yemen oil installation

Austrian energy major OMV said it has no plans to restart oil production in Yemen, despite a three-day ceasefire in the country. The situation there remains too volatile, OMV said. The three-day halt of fighting started yesterday, and was proposed by the Saudi-led coalition and backed by the UN.

OMV has been present in Yemen since 2003, after it acquired Preussag Energie GmbH, adding to its upstream portfolio six exploration and production licenses. In 2015, however, as the hostilities began, the Austrian firm gradually shuttered its projects there, following a port blockade that effectively put an end to exports. The company declared force majeure on all its activities in the country, noting on its website that a quick restart was possible once the political situation allows it.

OMV said in May this year that it wasn’t going to resume upstream operations in either Yemen or Libya, where it also has a presence, before the winter. Initially, the force majeure on its Yemeni operations was to last for six months, but it seems like it may be prolonged if fighting continues. At the same time, however, then-CEO Gerhard Roiss said the company did not plan to leave either Yemen or Libya for good.

The Austrian company reported a current-cost-of-supplies net profit of US$244 million (EUR 222 mln) for the second quarter of the year, down 39 percent on the year.

Yemen has been the site of a proxy war between Saudi Arabia and Iran after the Houthi rebels forced President Abd-Rabbu Mansour Hadi to flee to Saudi Arabia, Yemen’s neighbor to the north. The Shiite Houthis are allied with Iran, Saudi Arabia’s regional archrival. The international community recognizes Hadi as Yemen’s legitimate leader.

Yemen is a small oil producer, but its geographical position is strategic because it sits on the narrow Bab al-Mandab strait connecting the Red Sea with the Gulf of Aden—a waterway for much of the oil shipments in the region.

By Irina Slav for Oilprice.com

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