The prospect of the regime crumbling with no clear opposition alternative is starting to scare oil companies, says IHS Senior Middle East Energy analyst Samuel Ciszuk.
The security situation in Yemen is deteriorating significantly, with the increasingly beleaguered president, Ali Abdullah Saleh, facing defections from within the military, the diplomatic corps, political institutions and even regional governors over the past few days, after a very harsh crackdown on peaceful and unarmed protests in the capital Sana'a backfired, with the largest crowds so far turning out on the streets the following day to bury the dead.
Today (22 March) the situation is looking close to boiling point in Sana'a with increasingly heavy army units pledging their loyalty to either the regime or the opposition, moving into central parts of the city. General Ali Mohsen al-Ahmar, the commander of the north-western region, which includes Sana'a, yesterday (21 March) defected along with much of the brigade under his leadership, pledging loyalty to the "revolution". He was shortly joined by the commander of Yemen's eastern region, General Mohammed Ali Mohsen, as well as General Nasser Ali Shuaybi from the Hadramawt region (to the west of the eastern region), and General Faisal Rajab of the southern Lahij province. The military defections came as the governor of the strategic Aden governorate, Ahmed Qaatabi, resigned in protest against the harsh crackdown on protestors there, while Himyar al-Ahmar, the deputy speaker of Yemen's parliament also yesterday resigned, pledging his allegiance to the opposition. In a situation increasingly reminiscent of Libya in late February, as popular protests spread and gained momentum causing widespread defections from all parts of the regime-controlled state apparatus, an increasing number of Yemeni diplomats are also started to defect, including the ambassadors to Egypt and the Arab League.
Yemeni defections have, however, developed largely along tribal lines, in what still is one of the most tribal politics-based countries in the region. President Saleh still has support from a considerable number of northern Yemen's tribes although with the rate of defections increasing, his position is starting to look increasingly fragile and it appearing that the remaining amount of support left for him might be reaching critical levels. While the jostling between northern tribes for influence might continue for some time without a de facto civil war breaking out, it is essentially an inward-looking exercise by the Northern Yemeni tribal elite, which over the past 15 years has gradually come to dominate all of Yemen, following the 1990 shotgun-wedding reunification of the (northern) Yemeni Arab Republic with southern ex-Soviet satellite the People's Democratic Republic of Yemen (PDRY). It looks like no coincidence that three very senior military commanders in southern areas have defected, reportedly with at least large parts of their units, and might be heading to their home regions in support of their tribes.
This, however, also means that southern tribes, which again have increasingly started to unite around reviving their secessionist demands while looking like they might have more room to manoeuvre, as the northern domination is falling to pieces together with its ability to unify project power southwards. A similar development can be seen to the north, where a long-time uprising in the Sada area among Shi'a tribes against the Saleh regime has erupted again after a period of quiet. With the "historic" challenges to Yemeni authority right now falling outside of its preoccupation with surviving in its own centre, an increased activity by Al-Qaeda loyal forces in the country can also be expected, as the breakdown in security in the country's periphery, including the eastern and south eastern parts of old North Yemen, would allow it to advance its position. The groups loyal to Al-Qaeda have too benefitted from tribal support in Yemen, bounding up with and drawing support from tribes opposed to greater central authority. Indeed, with Al-Qaeda groups interested in using Yemen as a safe heaven for training, it is likely that such groups will do what they can to fan the flames of unrest in the country in order to weaken any kind of central power and keep the regions of their main activity constantly destabilised. Unfortunately for IOCs, some of Yemen's main oil producing areas are not far from the areas where Al-Qaeda loyalist activity and presence has been the strongest, notably in the greater east-central Ma'rib area.
IOC reasons to fear
As IHS Energy has reported repeatedly, the reasons to fear are significant for the oil industry, with tribal or Al-Qaeda strikes on oil facilities and employees taking place in Yemen on a high level compared to the rest of the Middle East and North Africa, except for Iraq. With oil and gas export income being key to Yemen, its security forces have nevertheless made it a priority to guard oil and gas upstream, midstream and downstream installations, generally with success. If forces are now being deployed to the heartland of Northern Yemen and potentially sucked into a civil war between the main tribes there, IOCs might quickly find themselves in a physically very vulnerable position. Apart from Al-Qaeda loyalists, Yemeni tribes have often used attacks against oil and gas infrastructure, or the abduction of oil workers, as a way to gain bargaining power vis-à-vis the central authority or other tribes. There is definitely no reason to assume that this practice should diminish just because the central authority is crumbling.
Moreover, much of Yemen's oil and gas resources are located in the borderlands between what could again become North and South Yemen should the southern tribes be able to launch a credible attempt to secede, which raises the spectre of fighting in and around the south-eastern parts of the Ma'rib region. Even if the militarily weak—and still not entirely united—southern tribes are not be able to extend their authority into the old borderlands close to those oil reserves, the scenario is extremely worrying for the Yemen LNG (YLNG) venture, which draws its feedstock gas from fields in the greater Ma'rib area and pipes it to the southern coast Balhaf port, deep into the would-be independent South Yemen. If a liberation war gets under way, that feedstock supply definitely remains in peril. There are also questions about how able the southern Yemeni forces would be in liberating and securing the Shabwa oil areas, which would fall within their demanded territory. It is one thing for a popular uprising to liberate its own towns and cities but quite another to build the logistics and organise the ability to project force across remote desert areas, as the Libyan uprising recently has exemplified. Ultimately, the south's ability to liberate itself rests on the level of chaos between the better organised and armed northern tribes, as they seem to reap most of the fruit from the disintegration of the Yemeni security forces. Rumours of renewed Saudi Arabian support for the southern secessionists have so far not been proven and are unlikely to be enough to sway events in the short term anyway, if they are indeed true.
Austria's OMV is so far the only IOC in Yemen to openly say that it is reducing its Yemeni staff and shutting down some of its production, the latter due to the pipeline bombing reported last week, which forced it to transport crude in trucks for some of the distance. It is nevertheless important to note that OMV would rather shut down production than transport the output by road, clearly showing that the threat level is rising further. "We are currently reducing staff in Yemen and have travel restrictions in place", a company spokesman told Platts, however, stressing that "the current situation does not have any impact on overall OMV production in Yemen in the short term". For obvious safety reasons, companies are generally not reporting large-scale evacuations in advance, with the assumption being that more companies than OMV are starting to draw down their expatriate presence in the country.
Outlook and Implications
Yemen is a very small exporter of crude and the eventual stoppage of LNG exports should not upset the otherwise rather saturated gas market, although its sales to East Asia might inconvenience supplies there somewhat in the wake of the recent Japanese earthquake and shutting down of a large number of nuclear reactors. Within Yemen, however, there is reason for deep caution among IOCs, as the political situation seems to be deteriorating and the central government's authority crumbling in the face of increasing defections from key tribes. With the northern tribes—which have come to dominate the united Yemen since 1990—increasingly turning their power projection inwards in attempts to remove the regime under President Saleh and jostle for more influence in a post-Saleh situation, the risk for a civil war in the north is high. Meanwhile, the southern tribes supporting secession see their opportunity to launch an attempt for liberation. If so, IOCs are highly likely to be caught in the resulting upheavals and should prepare for quick evacuations. Even if this does not come to pass, the coming weeks will be challenging and threatening, as Yemeni security forces appear to scramble to the northern heartland, leaving oil companies exposed in one of the most hostile areas of the Middle East.
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