Algeria Attack Poses a Dilemma for Western Oil Companies

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Louafi Larbi / Reuters

Algerian gendarmes escort a freed Norwegian hostage at a police station in In Amenas, Algeria, on Jan. 19. 2013

With this week’s hostage debacle in Algeria — which killed 23 oil workers and 32 hostages, and ended in a fiery assault on Saturday — international energy companies operating in the region are left grappling with an urgent question: Can they keep their personnel safe amid the region’s political upheaval amplified by the conflict in Mali, where French forces have intervened to stop government forces being overrun by jihadist militants?

At stake are billions of dollars in investment in the wider Maghreb and West Africa by dozens of Western companies. The assumption that energy installations in the region were safe from terrorist attacks collapsed before dawn on Wednesday, when armed militants invaded the living quarters of Algeria’s In Amenas gas facility in the remote southeastern part of the country, seizing hundreds of hostages, both local and foreign — among them American, British, Japanese, French and Norwegian oil workers. The impact of that attack, for which Algerian jihadist commander Mokhtar Belmokhtar claimed responsibility, will likely be felt for years.

“Oil companies will have to factor in completely different security measures,” says Fadel Gheit, a senior energy analyst at the New York City–based investment bank Oppenheimer & Co. “These facilities are absolutely naked.”

(MORE: Algeria’s Hostage Crisis: What Was Behind a Shadowy Militant Leader’s Plot?)

The biggest impact of the hostage debacle will be on Algeria itself, which relies on energy production for 95% of its exports and more than 60% of its total revenues. The In Amenas plant, a joint venture with BP and Norway’s Statoil, accounts for more than 10% of the country’s natural-gas output. Foreign companies began evacuating their staff from Algeria immediately after the kidnappings, and on Friday, British Prime Minister David Cameron told Parliament that security had been beefed up around Western commercial and diplomatic facilities elsewhere in the region too.

There is no knowing when oil companies will deem it safe to return expatriate staff to Algeria, let alone risk plowing billions into new energy projects; Algeria has been courting Western investment, not only in its hydrocarbon sector but also to finance such renewable-energy plans as solar plants in the vast Algerian Sahara. At minimum, potential investors will now drive a harder bargain, given the additional expenses they would have to incur on security in order to expand their infrastructure in Algeria. “Operating in Algeria has just become more expensive,” Eurasia Group’s Africa director Philippe de Pontet says in a memo sent to clients on Friday. “Assets sold in the coming 12 to 18 months with have a significant discount applied.”

The new threat to their economy’s economic lifeline has shaken ordinary Algerians. “People are very worried,” Hocine Lambriben, a reporter at Algeria’s al-Watan newspaper, told TIME on Friday from Algiers. “For many years, these facilities were presented to us like impregnable fortresses where site security was guaranteed,” he said. “It would be catastrophic if other facilities were targeted by jihadists. Foreign oil companies would likely reconsider their presence in Algeria.”

(MORE: Westerners Kidnapped in North Africa — but Is France the Real Target?)

For now, oil companies are not disclosing their plans. Still, a glance at the map of North Africa is enough to show the depth of the security challenge they face. Western oil companies involved in Chad and Nigeria could now be more vulnerable, since each country has deployed hundreds of troops to join the French-led war in Mali, against which the jihadist kidnappers in Algeria claimed — possibly opportunistically — to be retaliating. And Nigeria is already fighting a domestic battle with the violent Islamist Boko Haram movement, an ideological fellow traveler of the Mali insurgents.

The dangers expand elsewhere, with huge oil reserves attracting Western companies to set up production across the vast Sahel. South of Algeria and Mali sits Niger, a dirt-poor desert country with the world’s fourth largest output of uranium, which supplies France’s crucial network of nuclear power stations. East of Algeria is Libya, where a number of Western companies exploit some of Africa’s biggest oil reserves, but where security remains plagued by militant groups like the one that killed four Americans in an attack on the U.S. consulate in Benghazi last September.

(MORE: The Crisis in Mali: Will French Air Strikes Stop the Islamist Advance?)

As more countries are drawn into the French-led operation, the dangers could proliferate. “The risk of additional kidnappings and asymmetrical reprisals against French and allied-country targets in North Africa, the Sahel and beyond will rise sharply,” de Pontet warns.

On Friday, Libya’s Petroleum Faculty Guard announced that it had beefed up its military presence in and around the country’s energy facilities. The new measures, it said, include the creation of “a special operations room” to monitor oil-and-gas plants. Such measures are late in coming. Gheit says he has been shocked at what he perceives to be inadequate security in a country awash in weapons and with weaker central authority since the fall of Muammar Gaddafi. “These sites are very, very vulnerable,” he told TIME, hours before Libya announced its increased security measures. “If somebody targets these sites, they will get them, there is no question in my mind.” It has taken the deaths of a number of foreign and Algerian oil workers to jolt governments into taking long overdue security precautions. Oil companies and the governments that host them will be hoping those actions will be enough to keep oil workers safe and their Western partners from leaving.

MORE: Mali’s Looming War: Will Military Intervention Drive Out the Islamists?
19 comments
ObaidKarki
ObaidKarki

The useless Algerian jumpy Army murdered 37 BP Roughnecks who’re taken hostage by Algerian Militants. Algerian Army seen anything moves in their way is an enemy of the state and must be gunned-down. I don't feel sorry for BP Roughnecks. They’re very highly paid petty thieves hired to steal hydrocarbon & starve natives for living. During election, Obama vowed to protect Abdelaziz Bouteflika if he will supply Israel Algerian gas instead of Egypt at 10% of Platt or for free incase al-Qaida fiddled with the gas-meter. Now that Obama inaugurated. I don’t think he needs neither Abdelaziz Bouteflika nor Israel. After all BP is British Norwegian SWF and those 3 Americans who lost their lives are BP Roughneck Collateral victims covered by huge variety of good quality Insurance coverage. Abdelaziz Bouteflika Algerian Regime coldblooded hypocrisy condolences insulted concerned governments and victims' families. Since Abdelaziz Bouteflika jumpy Army is to be blamed for murdering BP Roughnecks. Dumb-down now! Nobody would dare to ask. What’s the Algerian Militants motive and why 29 are martyred and 3 captured. Is it greed as Abdelaziz Bouteflika’s Oh No.? Boring. Abdelaziz Bouteflika would privilege Algerian Militants to fight Arabspringers for him but Algerian Militants ditched Abdelaziz Bouteflika and preferred trouble to prosperity to commit extreme crime to have the World’s attention outloud: No Thugocracy on planet earth has the birthright to appropriate commonwealth to BP & its siblings. Such showdown ain’t first but it’s a beginning of new era of hydrocarbon terror.

MJ744
MJ744

It seems amazing that it has taken this incident to wake western governments to the fact that Islamist groups/States now control the northern half of the African continent. This was an incident waiting to happen. This is now the 'real' front line of the war on terror. A short ferry ride from Spain, or a couple of hours by air to London. We've been too busy in Afghanistan, and taken our eye off the ball where the real threat comes from : North Africa.

drudown
drudown

It is is disingenuous at best for Big Oil to enter war-torn regions of the world, become ensnared in some self-fulfilling prophecy that ensues, and try to raise the price of commodities that produce record profits. 

harm248
harm248

@TIME @TIMEWorld #oil #Africa, uhoh, looks like a new theater in the war...

THENONCONFORME1
THENONCONFORME1

@TIME @TIMEWorld Islamic Terrorism is not a religion but a crime that needs to be prosecuted for the good of us all.

saintgeorge5
saintgeorge5

Will West ever learn?  Stop, so called democracy, onlt to promote the extremist agenda.  Where all these weapons came from - LIBYA.  Libya is in a mess, where cut throat militias roam the streets and kill people, with views differing from their Sharia agenda.


Democracy cannot be promoted by outside force.  It has to come within the country.  Next stop Syria.

liloufafa
liloufafa

@TIME @timeworld I thought that was not the priority! Don't you know that France is struggling against terrorism in this area?

kaatu88
kaatu88

@TIME they created it to accur oil wells so they must pay

nevenhendricks
nevenhendricks

@TIME @TIMEWorldSad that Western oil companies have paid off tyrants - leaving an opportunity for terrorists to garner support of the masses

JohnMcCarthy
JohnMcCarthy

Whatever their motives, these terrorists are intransigent in their resolve.  Their willingness to not only give up their lives but their desire to do so makes it impossible to enter any rational dialogue.  The Algerian swift and forceful action appears to be the best response.

TrueBeliever
TrueBeliever

The terrorists are like a virus looking for a body to inhabit.

Send the Marlborro Man to Oprah to confess his sin.

MelPol
MelPol

Winning the war against Islamic militants is not necessary, but they must be constantly weakened by drone strikes and swat teams. The militants have only one ideology and it is that of gaining a larger share of the nation’s wealth. Pacifying militants by giving them the opportunity to become drug dealers is a workable option.

TrueBeliever
TrueBeliever

The United States should get the hell out of Africa.  Let Mali have Africa.  It is now and always will be the Dark Coninent.  Dark Evil regimes with Dark Motives and no ambitious plans save only war, war, war.

MehrganHD
MehrganHD

The next headline of liberal media:

" Obama to create new jobs in Algeria"


charlesfrith
charlesfrith

@PKinbangkok @TIMEWorld Actually it's the greatest business opportunity for oil companies in Africa since Libya was bombed.

Whatanotion
Whatanotion

@drudown The economic momentum has law to back up the poor judgement you incidentally allude to.   If the definition of what it means to "make a profit" might be changed; then maybe the legally well fed beast could be tamed.   Think more; your doing well.

PKinbangkok
PKinbangkok

@charlesfrith But of course. Surely, bombs weren't invested without expecting a handsome payback.

drudown
drudown

@Whatanotion @drudown 

"Have you come to pose me riddles?" - Cersei, 'Game of Thrones'

I don't follow your first sentence- humor me with specifics. 

There is a huge difference between being "for profit" and artificially manipulating the price on account of tenuous reasons that do not materially burden the cost of doing business which, I hasten to reiterate, should be absorbed by the record profit margins in any event.

charlesfrith
charlesfrith

@PKinbangkok Time Magazine is the gold standard of US propaganda. Henry Luce duped more American's than we'll ever know. Pure magic.