As Yemen descends into chaos, Nexen quietly leaves Arabian Peninsula


Shiite Huthi fighters shout slogans as they drive in a the back of a vehicle in the Yemeni capital Sanaa on February 11, 2015. Western governments evacuated their diplomats from Yemen on Wednesday as conflict deepened in the impoverished Saudi neighbour which has long been on the front line of the war against Al-Qaeda.

As Yemen descends into chaotic sectarian violence, Calgary oil producer Nexen has quietly relinquished the last of its once-significant operations and exited the beleaguered country.

The Canadian arm of China National Offshore Oil Corp. had halted production from its remaining Yemeni oilfield in December due to a “security threat” and had long-ago moved expat employees out of the impoverished country as it lurched toward civil war.

The U.S., Britain and Saudi Arabia are among the countries to close their embassies in recent days after the Shi’ite Muslim Houthi militia toppled the president last month and seized power. 

The UN Security Council demanded Sunday the rebels end the “illegitimate seizure of power.”

Nexen had produced more than 1.1 billion barrels of crude oil in the southwestern corner of the Arabian Peninsula after it arrived in 1987. Its operations had been scaled back significantly in 2011 when the Yemini government did not extend a production sharing agreement for the once-prolific Masila block.

Nexen retained its lease for Block 51 of the Bashir al Khair-A oilfield but production has reportedly fallen to about 1,5o0 barrels a day.

CNOOC, which bought Nexen in 2012, doesn’t report on its non-core operation in Yemen.

“We’ve thoroughly reviewed our operations in Yemen and have determined that Block 51 is not economic for Nexen,” Diane Kossman, a company spokeswoman, said in an email Tuesday.

“We have notified the Yemen Ministry of Oil of our plans to relinquish our operations, and will work closely with our employees and the Yemen government over the next few months to safely transition the operations,” she said. “This does conclude our Yemen operations.”

The Yemeni government was a minority partner in Block 51 with Nexen but these days it isn’t entirely clear exactly who is governing the ancient land long dominated by tribal and religious alliances. It had been two separate countries for years until 1990 and plagued by civil war since then.

The north of the country that is home to 24 million people is dominated by Iranian-backed Houthis, who overran the capital Sanaa in January. Media reports say forces loyal to ousted Sunni president Abd-Rabbu Mansour Hadi are competing with Sunni separatist groups to control the south.

Yemen is the ancestral home of Osama bin Laden, home to the most active chapter of al-Qaeda and, while Hadi was president, a critical U.S. ally in its fight against Islamic militants.

Saudi Arabia has also declared the Houthis a terrorist group.

Nexen’s operations were largely unaffected by the ongoing political crisis that plagued Yemen but it wasn’t entirely immune from the violence. In September 2006, one of its workers was killed and two others injured when suicide bombers attacked its oil export terminal on the Gulf of Aden.

The company was also well aware of the risks it faced operating in a politically unstable country. The news release about its first oil production at Block 51 in 2004 cautioned about the potential for changes to government tax and environmental policies as well as a warning about “actions by insurgents or other armed groups.”

Yemen has experienced cycles of instability previously but the situation has steadily worsened since 2011 and there are fears it will descend into a lawlessness of failed-states like Afghanistan or Somalia.

One of the small tragedies in Yemen’s disintegration is that all the good work Nexen did for people there over close to three decades is coming undone. At one point the company had in excess of 900 employees in Yemen with more than 90 per cent of them Yemeni nationals.

As part of its community investment initiative, Nexen also provided scholarships for 130 Yemenis to further their university education in Calgary and supported students at schools in Yemen. Even though CNOOC has abandoned its oil assets in Yemen, the company will continue to honour the financial commitment it’s made to the young men and women with scholarships until they complete their education.

“We currently have 23 students enrolled in the program with the last group of students expected to graduate in the first half of 2018,” Kossman said. “In addition, we have an in-country scholarship program which has 11 students attending colleges and institutes in Mukalla (Yemen), with the last group of students expected to graduate in June 2016.”

It’s an unfortunate end for Nexen in Yemen but its far sadder for the Yemenis it helped provide hope for a better future for them, their families and their country.