New Normal Settles in Shabwah Energy Corridor

By September 2019Yemen

The dust has settled quickly in the Marib-Shabwah energy corridor due to the vigorous and pragmatic actions of all key actors. Shabwah tribes are looking opportunistically at the strengthened presence of President Abdo Rabbu Mansour Hadi’s government and the Islahi military. The main personnel change was the removal of Shabwah Political Security Organization head Saleh Lamrooq due to his close ties to the Nukhba, the 7th Brigade of which is led by his son Mahdi. Hadi military reinforcements continue to flow into Shabwah, including tanks and armored personnel carriers; these symbols of government strength will be placed at strategic, high-visibility locations.

The Nukhba have been temporarily “sent home” on Emirati orders, and told that they remain accountable for their equipment and weapons, backed by ongoing Emirati payments via the al-Omqi exchange house in Ataq. In Ataq city itself, the ousted 3rd Nukhba Brigade has been replaced by outsider Hadi forces of the 21st and 159th Yemeni Army Brigades backed by northern Salafi tribesmen, causing some alarm among locals. Efforts by the 21st Brigade to quickly recruit and train Ataq natives have gotten off to a rocky start, but they do show that the government has resources and is moving quickly to employ more locals from the disbanded 3rd Nukhba. Of note, a number of Southern Transitional Council (STC) battalions also remain operational but passive, having neither fought the Hadi forces in August nor left their camps since. They continue to be supplied at their bases, with contractors receiving payment at the point of delivery, posing the question of where such resources are coming from.

Governance was quite steady throughout the August crisis, with a strong focus on continuing progress in the energy sector. Yemeni Minister of Petroleum Aws al-Oud was active on the ground in the provincial capital of Ataq as soon as Hadi forces recovered the town on 25 August. He met with both the provincial security committee and the governor’s team. A Shabwani-born technocrat from the powerful Awlaki tribe, the minister showed that he had the support of the Saudis, Prime Minister Main Abdulmalek and the Islahi military. Early meetings were held with the key oil officials in Shabwah, all of whom remain in place after the crisis: Ministry of Petroleum branch director Saeed al-Marnoom, Yemen Company for Investment in Oil and Minerals (YICOM) Director Muhsin Saleh Thabit, and Ministry of Petroleum oil distribution manager Saleh al-Kawadeem.

Al-Oud stressed the need to keep accelerating progress in the Marib-Shabwah energy corridor, specifically raising the issue of completing the tie-in pipeline between Jannah Hunt (Block 5) and Al-Alam (Block 4). He confirmed that the plan remains to export oil from Marib via the new 15-inch, 150,000-bpd pipeline that will link the Central Production Facility at Jannah Hunt and the Al-Alam pipeline loading facility. Al-Oud also noted that Block 18 and Block 5 oil would be exported via Nushaimah terminal, where 600,000 barrels of storage space is available and in serviceable condition.

Construction on the new pipeline was halted from 31 August due to Belharith tribal calls for jobs at the Jannah Hunt facilities, but was restarted on 5 September. The 107th Yemeni Army Brigade is securing the pipeline route, backed by some elements of the 21st Brigade. Thus far, neither STC units nor nearby Nukhba are interfering with these arrangements.

OMV continued to produce oil at Uglah (Block S2) throughout the crisis and keeps trucking in reduced volumes of oil to Al-Alam. The profitability of the trucking arrangement, run by Hadi-aligned northern trucking company Al-Hutheily, ensured that the flow was not interrupted. This is one upside of the ongoing commercial influence of northern businessmen who are closely connected to Hadi’s General People’s Congress (GPC) and the Islah party. Of interest, the local Ministry of Petroleum branches in Shabwah and Marib also struck a deal in early September to transfer two large 80,000-liter tankers of OMV-operated crude per day to the Marib refinery. This 1,000-bpd flow will be refined into diesel, which will then be trucked south to Ataq’s thermal power plant. The arrangement was put in place because the Marib refinery had proved to be very late and erratic in providing Ataq with fuel.

In our view, the Marib-Shabwah oil-for-diesel swap is one of a number of encouraging signs that the post-crisis situation in Shabwah might have some silver linings for IOCs. The Hadi government – backed by both Saudi Arabia and the UAE – has shown a dynamic side both during the fighting and in the post-battle periods. The oil minister appears quite active and progress is visible on the ground in a number of energy projects. The UAE seems to be backstopping local stability by continuing payments to the Nukhba and perhaps the STC as well, while cautioning them to be passive and non-confrontational. Meanwhile, the Hadi government seems to be shoveling Saudi money into new military recruitment from the local communities, which is an encouraging sign.