Oil Report

China warns oil firms against growing risk in Yemen

* Two Chinese firms pumping roughly 20,000 bpd oil in Yemen

* Sinopec sent back its staff recently after pull-out in March

* CNPC service unit pulled out crew in March

BEIJING, Oct 21 (Reuters) - The Chinese government last week warned China’s oil firms active in Yemen to take precautions to protect their assets and ensure staff safety as the political situation in the small Middle East oil exporter worsened, industry officials said.

Chinese state oil firms -- Sinopec Corp and Sinochem Corp -- both produce crude oil in Yemen, with combined equity production of roughly 20,000 barrels per day, or 8 percent of the country’s total.

Sinopec alone has several hundred workers there.

“After Syria, we’re now called upon attention on Yemen,” said a London-based Chinese trader, adding his firm’s headquarters in Beijing last week conveyed a letter of warning from the Ministry of Foreign Affairs.

The United Nations’ Security Council will vote on Friday on a British-drafted resolution on Yemen that condemns the government crackdown against pro-democracy demonstrators and says those responsible should be held accountable .

Comment by Jiang Yu, the spokeswoman for China’s Foreign Ministry earlier on Friday suggested China was not going to oppose the resolution.

“We have always taken a constructive attitude in the Security Council discussions about Yemen, and we will continue with this attitude in dealing with subsequent actions,” Jiang told reporters.

Sinopec Corp, China’s No.2 state energy firm, pulled out its staff in March during the previous round of violence, but sent them back to the oilfields around August.

“It’s (20,000 bpd) is not a small amount of oil. These are hard-won assets,” said the London-based trader.

Sinochem Corp, which owns nearly 17 percent of an onshore block operated by French Total , one of Yemen’s largest oilfields with daily output of 80,000 bpd, also received warning from the Chinese Foreign Ministry, said a second oil official.

“It’s government’s job to issue the warning. No decision has been taken yet to evacuate. After all Sinochem is not the operator,” said a second oil official.

BGP Inc, a CNPC unit that provides geo-prospecting and seismic services, pulled out its 30-man crew in March.

“We don’t want to repeat the scenario of Libya that everyone was pulled out last minute. Safety has become an extremely important issue for the company,” a BGP executive told Reuters this week.


Oil firms are worried potential sanctions could stifle oil trade of the Middle Eastern exporter, similar to that of Syria where companies, including China’s CNPC and Sinopec, struggled to ship their equity crude oil output out.

In terms of actual imports into China, the impact of loss of production is seen as minimal and firms already have contingency plans to look elsewhere for replacement.

China imports each month roughly 250,000 tonnes of Yemeni crude, or just one percent China’s total crude oil imports.

“We won’t worry about lack of oil. If the situation in Yemen worsens, Yemen crude could be replaced by West African crude or even Libyan crude,” said a third oil official familiar with Sinopec’s operations in Yemen.

All oil flow through Yemen’s main crude pipeline to its offshore Ras Isa terminal on the Red Sea has stopped after three explosions on the pipeline in the last two weeks, a shipping source said on Thursday. (Additional reporting by Chris Buckley; editing by James Jukwey)