UPDATE 2-Yemen gas pipeline blown up, output halted after drone attack
* Militants blow up feeder pipeline to LNG plant after U.S. drone attack
* Explosion blow to Yemen economy, already hit by year of unrest
* Al Qaeda has exploited unrest to seize territory in south (Adds background on Yemen's economy, energy sector)
By By Mohammed Mukhashaf
ADEN, Yemen, March 30 (Reuters) - A U.S. drone attack killed at least five suspected al Qaeda militants in southern Yemen on Friday, and gunmen retaliated by blowing up a gas pipeline, forcing LNG output to be stopped, officials and energy workers said.
The drone set fire to the militants' car in the southern province of Shabwa and killed all its occupants, one official said. One bystander was also killed and five were wounded, officials and residents told Reuters.
Hours later gunmen believed to be militants blew up a pipeline which transports gas to a facility whose leading stakeholder is French oil major Total at Balhaf port on the Arabian Sea, energy workers said.
Residents said flames could be seen from several kilometres (miles) away and a company employee said exports had stopped.
"The explosion took place 28 km (17.5 miles) north of the Balhaf LNG export plant. Production has been halted," an employee of Yemen LNG, who asked not to be named, told Reuters.
The $4.5 billion Balhaf liquefied natural gas (LNG) export facility opened in 2009 and was the largest industrial project ever carried out in impoverished Yemen.
Oil and gas pipelines have often been attacked by Islamic militants or disgruntled tribesmen. The pipeline to Balhaf was last blown up in October, hours after an air raid on militants, and took about 10 days to be repaired.
A text message sent to journalists, purporting to come from the al Qaeda-affiliated Ansar al-Sharia (Supporters of Islamic Law), said the group was behind the attack.
"The mujahideen (holy war fighters) blew up the pipeline ... in retaliation for the strike for which Crusader America and its obedient slave in Sanaa are responsible," the message said, referring to the Yemeni government, a close U.S. ally in the fight against al Qaeda.
Al Qaeda has strengthened its hold on southern areas of the Arabian Peninsula country, seizing several towns during the past year of protests against President Ali Abdullah Saleh, who left office in February.
The United States has retaliated with a campaign of drone strikes on the Yemen-based regional wing of al Qaeda, which has claimed responsibility for operations that include a failed plot to blow up a U.S.-bound passenger plane in 2009.
In an earlier text message, Ansar al-Sharia said two militants were "martyred" in the drone attack and four passersby were injured.
Earlier this month, U.S. drone attacks killed at least 25 al Qaeda-linked fighters including one of their leaders, and a Yemeni air force raid killed 20, in the biggest airstrikes since the new president, Abd-Rabbu Mansour Hadi, took office. [IS:nL5E8EA019]
Neighbouring Saudi Arabia, the world's biggest oil exporter, shares U.S. concern over the expansion of al-Qaeda's regional wing in a country next to major Red Sea oil shipping lanes.
Yemen has the capacity to supply up to 6.7 million tonnes of LNG per year. In 2010, Yemen LNG, the 16th largest seller of the gas, shipped more than half of its supplies to Asia, the rest going to the Americas and Europe.
The company delivers LNG under long term contracts to GDF Suez, Total and Korea Gas Corp.
Yemen is only a small crude oil producer with a daily output of about 260,000 bpd of oil.
But its location on the Bab al-Mandab strait, through which millions of barrels of oil and tonnes of other goods are shipped daily between Asia, Europe and the Americas, could make instability in Yemen a risk to global trade.
An attack one year ago by tribesmen on its main oil artery cut off crude to the 150,000 barrel per day Aden refinery, forcing it to shut, creating the fuel shortages.
The shortages have prompted Saudi Arabia to repeatedly donate refined oil products to its poor neighbour.
In a separate incident, suspected al Qaeda fighters shot dead two men in Aden on Friday, a local official said. The victims belonged to a clan that has opposed the group's militants in nearby Abyan province, he said.
For a factbox on Yemen's energy industry, click on (Additional reporting by Tom Finn in Sanaa; Writing by Firouz Sedarat; Editing by Tim Pearce)