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Sun 1 Jan 2012 11:47 AM

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Saudi throws fuel lifeline to impoverished Yemen

Saudi diesel grant will cover country’s needs for two months, says oil minister

Saudi throws fuel lifeline to impoverished Yemen
Yemens monthly diesel consumption is valued at about $280m

Yemen's oil minister said on Saturday a grant of diesel from Saudi Arabia would be enough to cover the country's needs for two months.

"Yemen's diesel consumption is 260,000 tonnes monthly, worth $280m," said oil minister Hisham Sharaf. "We sell it at 25 percent of its cost because of the government subsidy on diesel. The Saudi grant will cover Yemen's diesel needs for two months."

Industry sources said on Thursday Saudi Arabia's Aramco was seeking to buy fuel in order to donate about 500,000 tonnes of products to Yemen in January.

It would be the second time in six months Saudi Arabia has thrown a fuel lifeline to its impoverished neighbour, where a political crisis over demands for the ouster of President Ali Abdullah Saleh drags on. Saudi Arabia fears Yemen could slip into civil war.

Saleh has agreed to step down after 11 months of mass protests. A government split between members of his party and opposition figures is to work with the acting leader, Saleh's deputy, to lead Yemen to a presidential election in February.

Sharaf said production at the Masila oilfield, now under Yemeni administration after Canada's Nexen had one of its production contracts expire without renewal, was 70,000 barrels per day.

Yemen relied on 3 million barrels of Saudi-donated crude oil to run its refinery in June, when its main pipeline was shut after blasts, unleashing a fuel shortage that degenerated into clashes in which people were killed at dry petrol stations.

The pipeline, which was repaired during the summer, is shut once again after attacks in October. The lack of crude flow in the pipeline has also forced the Aden refinery, where production mainly meets domestic fuel demand, to halt operations.

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