CANADIAN NEXEN IN THE HADRAMAUT: THE TERMINAL AND

C O N F I D E N T I A L SECTION 01 OF 02 SANAA 002204

SIPDIS

E.O. 12958: DECL: 09/03/2013
TAGS: EPET PTER EINV PREL ECON YM ECON COM ENERGY
SUBJECT: CANADIAN NEXEN IN THE HADRAMAUT: THE TERMINAL AND
CPF

Classified By: Charge Alan Misenheimer for reasons 1.5(b,d).


1. (c) Begin summary: During an August 7-11 visit to the
governorate of Hadramaut, Embassy officials toured oil
company Canadian Nexen's Central Pumping Facility (CPF) and
Export Terminal. Nexen said it has good relations with its
neighbors and there have been no threats to the pipeline, but
noted that both facilities are focused on the safety and
security of operations and personnel. Since the October 2002
attack on the French tanker "Limburg" and the 2003 Riyadh
bombings, Nexen has increased its security posture by
purchasing new vessels for maritime patrols, fencing in its
airstrips, and installing additional barriers. End summary.

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CPF: Security and Coordination
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2. (c) Embassy officials met with Central Pumping Facility
(CPF) Production Manager Ralph Johnson, Environmental Health
and Safety Director Alan Philips, and Administrative Manager
Mohammed Bin Naibhan. The CPF is a self-sufficient compound
with generators, a sewage treatment plant, an airfield, and a
helicopter pad. The CPF is protected by both military and
contract guards, and the 120 kilometer pipeline to the
Terminal has six isolation points -- 4 controlled by the CPF
and 2 by the Terminal -- that can be monitored by both.


3. (c) CPF personnel security includes monthly updates of
employee lists and a database of electronic copies of
employees' passports, which are shared with U.S. Embassy
Sana'a. Nexen officials said that all personnel are now
flown to/from Sanaa and between the CPF and the Terminal at
greater altitudes to decrease any land-based threat.


4. (c) According to Johnson, oil companies Total, DNO, and
Dove have tied their lines into the CPF, which is expected to
produce between $275-300 million in revenue over the next 2
years. Nexen, "as the largest and most established company
in the region, has also assumed a mentoring role" for their
overall operations, including security. There is "constant
radio communication" between the four and each has
participated in UNDP-sponsored security meetings in Sana,a.
In early August, Nexen also held a workshop with local Yemeni
officials to discuss contingency plans and clarify
appropriate points of contact.

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Terminal: Maritime and Compound Security
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5. (c) At the Terminal, Embassy officials were escorted by
Terminal Manager Nigel Precious and Crude Oil Exports
Superintendent Barry Herbert. Completely self-sufficient,
the Terminal operates 24 hours a day, 7 days a week to
prepare and batch oil from the CPF to meet quality and
quantity standards for export. Two expansion groups are
currently onsite: one studying the feasibility of adding a
second SBM (Single Buoy Mooring); the other conducting
maintenance on storage tanks. Nexen is also providing ROYG
guidance and coastal surveys for a proposed ROYG refinery a
few miles east of the Terminal. (Comment: If the project
goes forward, the ROYG will likely use Nexen,s SBM for
export. End comment.)


6. (c) According to Precious, Chevron, Texaco and other
routine consumers share information and observations on Nexen
and ROYG's security posture, "which have a direct impact on
the entire industry." In response to the 2003 bombings in
Riyadh, Nexen increased the Terminal's physical security by
installing additional barriers and fencing in the airfield.
Nexen officials said the ROYG military presence around the
facility has also improved. Forsight and "luck" saved Nexen
considerable financial loss when the Limburg was attacked in
October 2002 on its way to pick-up over one million barrels
of oil. Nexen had just completed a 1 million barrel storage
tank and was able to hold the excess until alternative
transportation was found.


7. (c) As part of ongoing efforts to strengthen maritime
security, Nexen also recently purchased four Delta 10m ribs
with twin 315-horse power engines. These vessels are more
sophisticated than those Nexen,s maritime security force (9
ROYG officers) had been using, and, while Delta trainers
accompanied the boats upon delivery, the ROYG-contracted
Pakistani trainers who took over upon their departure were "a
disaster." Nexen has now entered a month-to-month training
contract with the British-based Hart Group.

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Community Relations
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8. (c) Both the Terminal and CPF have extensive community
relations programs. In 1998 Nexen made a strategic decision
to provide support to the local population via the local
government. The local councils submit proposals directly to
Nexen, and the company decides which to fund. Nexen,s
medical clinics also offer free health care and medicine to
the local population and the military, including medevacs.
CPF offiials estimate that 2,000 people a month pass through
the clinic -- of whom 1,200 are local villagers.


9. (c) A planned bypass in Wadi Arab to take the pipeline out
of the way of mudslides may impact community relations. The
villages along this portion of the pipeline help Nexen dig
out when floods bury the line, and moving the line will mean
a local loss of revenue. Nexen has maintained open lines of
communication with the villagers throughout the deliberation
phase to prepare them for change.

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Nexen Operations At A Glance
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10. (c) CPF Location: Masila, 2 hours southeast of Seiyun;

Employees: 2000 , 270 expats including 9 Americans;

Pumpng Capacity: 1700 million barrels since first oil in
1993;
-- 280,000 barrels of oil per day;
-- 7,500 barrels of diesel per day.


11. (c) Terminal Location: As-Shahir, 2 hours east of Riyan
International Airport, 2.5 hours east of Mukalla

Employees: 100-120 people onsite;

Storage Capacity: 3 - 3.5 million barrel storage capacity,
including a 1 million barrel storage tank;

Export Capacity: 7 billion barrels since 1993;
-- Single 36" export line;
-- 8.5 - 9 million barrels of oil per month;
-- 8 - 9 ships per month including small lifts (500,000
barrels) and large lifts (1.9 million barrels);
-- 60,000 barrels per hour loading rate.

MISENHEIMER