UPDATE 2-Strike action stops Yemen oil exports

(Updates with comments from Canadian company Calvalley)

SANAA/DUBAI, Feb 14 (Reuters) - Oil production and

exports from Yemen's Masila oilfield, the country's largest,

have stopped after workers from state-owned PetroMasila went on

strike over pay last Thursday, oil ministry officials told

Reuters on Tuesday.

The strike at the Masila oilfield brings Yemen's total oil

output of around 260,000 barrels a day to a near halt as its

other major oil pipeline carrying light, sweet Maarib crude has

been shut since November after consecutive blasts.

"There is no export or production in Masila," a senior oil

ministry official said, adding that exports from the Ash Shihr

terminal had also stopped.

The bulk of crude exported out of the Ash Shihr terminal on

the east of the country is shipped to customers in Asia.

The country's largest oil refinery in Aden has not been

processing crude due to lack of oil flow in the Marib pipeline,

forcing the poorest Arab country to rely on imports and

donations from its powerful northern neighbour Saudi Arabia.

Impoverished Yemen has been brought to its knees by a year

of political upheaval with months of protests against the

outgoing President Abdullah Ali Saleh. Violence has escalated in

the run-up to the presidential elections set for Monday.

The government has lost control of whole chunks of the

country, giving southern separatists, northern Shi'ite rebels

and Islamist militants a window to further their goals.

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Although a small oil producer, Yemen's location on the

strategically important Bab al-Mandab strait, through which

millions of barrels of oil are shipped between Asia, Europe and

the Americas, makes instability there a risk to global trade.

State-owned PetroMasila has taken over operations at Block 14

in the Masila oilfield from Canadian's Nexen after the

government did not renew the company's licence when it expired

in December.

"Workers are demanding better salaries and retirement

packages and of course there is no way the local company

(PetroMasila) can match what Nexen was providing for its

employees," a Western official based in Yemen said.

There are several international companies such as

Calgary-based Calvalley, Norwegian oil firm DNO

and France's Total operating from the Masila

field and even though their workers have not gone on strike,

their operations are also affected, another oil official said.

"There is some 1 million barrels waiting in the pipeline but

it can't be shipped to the export terminal," he said.

In a statement, Canadian company Calvalley said work

stoppage will hurt production from all crude oil producers in

the Hadramout province including Calvalley's 7,000 barrels of

oil per day Block 9 and it will shut operations shortly when

crude oil storage tanks are full.

The company also said stoppage at Block 14 is restricting

the deliveries of crude oil for export from Block 9.

Calvalley said it was "cautiously optimistic" that the

current political environment in Yemen will improve after the

Feb. 21 elections.