Yemen loses $1.8 million after Norwegian oil company suspends production

Published on 3 July 2014 in News
Ali Saeed (author)

Ali Saeed

80‭ ‬DNO workers went on strike over a wage and benefits dispute‭.‬

80‭ ‬DNO workers went on strike over a wage and benefits dispute‭.‬

SANA’A, July 2—The government of Yemen lost $1.8 million (YR387 million) in ten days after a strike at  DNO, the Oslo-listed oil and gas company operating in Hadramout governorate, began on June 22, according to the company.

On June 24 the company announced the suspension of production at its Block 32 and Block 43 operations.

The suspension took place shortly after around 80 local DNO workers began a full strike demanding an increase in their monthly salaries and full medical insurance for their families, according to Riyadh Al-Jaradi, coordinator of the DNO Workers’ Union in Hadramout.

The total production of the two blocks under normal conditions is 3,400 barrels of oil per day (bpd). Of this, 1,600 bpd is apportioned to the company with the remainder going to the government of Yemen, according to a company statement.

“The company is committed to resuming operations in Yemen where it has been active since 1998 and is engaged with the government and the unions to resolve the outstanding issues,” the DNO statement read.

The suspension of production caused a total loss to both the company and the government of $3.4 million (YR731 million); the government sustained $1.8 million (YR387 million) in losses, and DNO $1.6 million (YR344 million). These figures were calculated based on the ten-day period between June 22 and July 1. However, the suspension remains in effect and losses continue to mount.

Anees Al-Hitari, head of the DNO Worker’s Union in Sana’a, said in a conversation with the Yemen Times that the Ministry of Oil set up a committee to resolve the issue between the company and the workers following the start of the full strike on June 22.

Representatives of the DNO Workers’ Union met on Tuesday with the Ministry of Oil committee and the company administration, according to Al-Hitari.

“The committee sided with the company and said that the company is unable at the moment to increase workers’ monthly salaries,” said Al-Hitari. “The strike will continue until they increase our salaries.”

In addition to Block 32 and Block 43, DNO has a stake in four other blocks in Hadramout. Block 47 has yet to be opened due to local disputes, despite being established in 2010; DNO is a partner in Block 53, which is run by a different company; and blocks 72 and 84 are still in the exploration phase.

For the Yemeni government, suspension of oil production is very damaging because oil exports make up 70 percent of government revenue. Oil production has been in sharp decline since January of this year because of the repeated sabotage of oil infrastructure by various armed groups.

In the first quarter of this year the government only generated $597.24 million (YR128 billion) from oil, whereas the fuel imports bill amounted to $974.9 million (YR210 billion) for the same period.