Nexen shutdown threatened in Yemen

A side of Nexen block 14 in al-Masila basin

By Dina O’Meara, Calgary Herald

Disgruntled Yemeni oil and gas workers threatened to shut down Nexen Inc. operations for a second time this year, saying union demands from a strike in May have yet to be met.

More than four months of negotiations have ground to a halt on Nexen’s “intransigent attitude,” union representatives in strife-torn Yemen said by e-mail Friday.

The oil and gas union also called on the government to end its 20-year partnership with the Calgary-based company when Nexen’s contract on its prolific Masila block expires in December.

Nexen currently is negotiating a five-year extension on its 52 per cent production agreement with the Yemen government.

“We believe that all the outstanding items discussed in May have either been resolved or there are processes to resolve them,” said Nexen spokesman Pierre Alvarez in an interview. “We continue to talk with the union and hope that a strike will not occur.”

Nexen was forced to halt oil production at its Yemen sites in May after almost 1,000 local workers walked off the job over compensation.

The Yemen assets produced a net total of 34,700 barrels per day in the second quarter, or roughly 17 per cent of the company’s overall year-end production of 242,000 barrels of oil equivalent per day.

Friday’s warning by the union came at the same time millions of anti-government protesters gathered in the nation’s capital calling for rebel forces to quash President Ali Abdullah Saleh’s regime by any means. The Middle Eastern country has been swept by revolutionary fervour since February during the beginning of the so-called Arab Spring, raising concerns about existing contract structure with foreign investors.

TransGlobe Energy Corp., which holds $100 million US in non-operated oil and gas assets and reserves in Yemen, said the company was confident its contracts with the government would be honoured.

The company’s operations were shut down for five months after rebels bombed a key export pipeline, but resumed production in midJuly.

“Things are pretty unsettled in Yemen, and one would hope that it will work itself out soon,” said Dave Ferguson, chief financial officer. “But the country does need investment from outside, so I think they would be hard-pressed not to honour contracts.”