Al - Qaeda network planned to assault the Canadian - run Mina al - Dhaba oil terminal on the Arabian Sea coast and take staff hostage, including Western expatriates, government spokesman Rajeh Badi said.
A nearby export facility for oil derivatives was also targeted, Badi said.
Al - Qaeda also plotted to seize the nearby Hadramawt provincial capital Al - Mukalla, a port city of 100,000 people, and the Ghayl Bawazeer area to its north, where they briefly declared an alleged emirate earlier this year.
" If they were to fail in seizing control of the facilities, the plan was to take foreign experts away as hostages, " Badi said.
The attack was planned for Monday, which coincided with the 27th day of the Muslim fasting month of Ramadan and was the second day of a mass closure of US missions across the Middle East and North Africa.
The plot was foiled around two days before its planned launch, Badi said.
Both Washington and London pulled diplomatic personnel out of Sanaa on Tuesday citing intelligence reports of an imminent attack by the Yemen - based Al - Qaeda in the Arabian Peninsula.
The United States took the unusual step of closing some 25 diplomatic missions in the Mideast Sunday, and then extending the closure for a week at 19 of them, in response to what it said was a credible and imminent threat of a major Al - Qaeda attack.
The Netherlands late Wednesday became the latest Western power to close its embassy in Yemen, citing " information that several western countries are potential targets of an upcoming terrorist attack. "
An intercepted conference call between Al - Qaeda leader Ayman al - Zawahiri and top operatives was reportedly the trigger for the US embassy closures.
More than 20 Al - Qaeda operatives from across the globe were on the call, including representatives of Nigeria ' s Boko Haram, the Pakistani Taliban and Al - Qaeda in Iraq as well as Yemen, US media reported.
A lack of clarity about the wider threat, however, remains. Late Wednesday, a UN report said Zawahiri has struggled to unite Al - Qaeda ' s various factions though the group continues to pose a threat.