"The kidnappers handed the German hostage over to tribal mediators an hour ago," the source told news agency AFP. "They are now on their way to the city Ataq, capital of the eastern
province of Shabwah."
Army and security forces said earlier on Tuesday said they had located the German oil pipeline engineer and two locals who were kidnapped in Yemen over the weekend.
The three captives were being held by armed tribesmen in a remote mountain village in the province of Shabwah, security forces said. The governer of the province, Ali Hassan al-Ahmadi, had said that he expected the prisoners to be released within the next several hours, news agency DPA reported.
Authorities believe the hostages are in good health.
The engineer, who had been working on a large gas pipeline project in the region, was abducted along with two Yemeni colleagues by tribesmen who demanded the release of an imprisoned clan member.
According to daily Bild on Tuesday, the oil expert is a 56-year-old father of three from the German state of Saxony.
The abduction reportedly took place some 30 kilometres from port city Balhaf, the final destination of the 300-kilometre pipeline the German is said to have been working on.
In December 2008 tribesmen kidnapped a German family of three, also demanding that the government release an imprisoned clan member. The family was released after five days.
Tribes in the unstable country have abducted more than 200 foreigners in the last 15 years, usually making demands of the government in return for the release of their captives.