March 1, 2013

Terrorist threats in Africa and the Middle East – are the costs of producing crude oil and gas…

Terrorist threats in Africa and the Middle East – are the costs of producing crude oil and gas expected to rise in the wake of the In Amenas attack in Algeria?

Islamic militant extremists, reportedly affiliated with Al Qaeda, stormed the In Amenas gas facility in Eastern Algeria (close to the Libyan border) on 16 January 2013 resulting in the tragic loss of over 80 lives.  The plant is run by BP, Statoil and Sonatrach.

Attacks in Africa and the Middle East on property owned by major oil companies, such as bombing of pipelines, and isolated attacks and kidnaps of oil and gas workers are by no means unheard of, but the scale of the In Amenas attack is unprecedented.

The attack highlights the severity of the Islamic extremist terrorist threat in North Africa and the Middle East and has given rise to extensive geo-political commentary on how to tackle the threat.  However, more directly, it has also caused major oil companies immediately to rethink protection of oil and gas facilities in Middle Eastern and African regions.  The attacks are predominantly motivated by organisations aiming to disrupt the supply of crude oil and gas to Western markets.  Consequently, key suppliers that are potentially most at risk and likely to be in need of further security measures are Nigeria, Algeria and Libya.  It is thought that Saudi Arabian and Iraqi plants ought to be adequately prepared should they suffer an attack on the scale of the In Amenas incident.

The full impact of the In Amenas attack remains to be seen.  The immediate reaction was for oil companies and governments to bolster security and evacuate non-essential personnel from sites where risk was perceived to be highest.

On 26 February 2013, Statoil announced that it was opening a full investigation into the In Amenas attack.  Statoil Chairman, Svein Rennemo, said the company would look into events before, during and after the attack to understand how to respond to such incidents.

The outcome of this investigation will be awaited with anticipation as its findings may prompt the implementation of increased long term security measures across the region.  Increased security manpower, more stringent background checks on employees to prevent insider assistance and advanced security equipment are all likely to be required and will inevitably lead to an increase in production costs.

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