We consider M-theory on compact spaces of G_2 holonomy constructed as orbifolds of the form (CY x S^1)/Z_2 with fixed point set Sigma on the CY. This describes N=1 SU(2) gauge theories with b_1(Sigma) chiral multiplets in the adjoint. For b_1=0, it generalizes to compact manifolds the study of the phase transition from the non-Abelian to the confining phase through geometrical S^3 flops. For b_1=1, the non-Abelian and Coulomb phases are realized, where the latter arises by desingularization of the fixed point set, while an S^2 x S^1 flop occurs. In addition, an extremal transition between G_2 spaces can take place at conifold points of the CY moduli space where unoriented membranes wrapped on CP^1 and RP^2 become massless.
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