x Abu Dhabi, UAEWednesday 26 July 2017

Algeria crisis casts shadow over Libyan oil industry

In the aftermath of the terrorist attack on the Ain Amenas gas plant in Algeria, security concerns are shifting to neighbouring Libya, where porous borders and unreliable armed forces leave the oil and gas industry vulnerable.

The siege at the Algerian gas facility, above, culminated in a dramatic final assault by Algerian commandos. Kjetil Alsvik / Reuters and Statoil via Scanpix
The siege at the Algerian gas facility, above, culminated in a dramatic final assault by Algerian commandos. Kjetil Alsvik / Reuters and Statoil via Scanpix

In the aftermath of the terrorist attack on the Ain Amenas gas plant in Algeria, security concerns are shifting to neighbouring Libya, where porous borders and unreliable armed forces leave the oil and gas industry vulnerable.

The siege at the Algerian gas facility culminated in a dramatic final assault by Algerian commandos. With dozens dead, operators BP and Statoil have to decide whether to resume production with their Algerian partner, the national oil company Sonatrach.

Security experts believe that the Algerian government will be able to contain the terrorist threat to its oil and gas industry and retain the services of the international oil companies.

"I expect a step-up in security. There won't be a second attack in Algeria," said Riccardo Fabiani, a North Africa analyst at the risk consultancy Eurasia Group. "I don't think there will be a pull-out, but some companies will reduce their presence for a while."

The terrorists behind the Ain Amenas attack have claimed to be acting in retaliation for France's military intervention in Mali, where Muslim extremists had been threatening to overwhelm government forces.

Algeria, an Opec member, produced about 1.3 million barrels per day of crude in 2011 and is the third biggest exporter of natural gas to Europe.

Similar attacks are more likely in countries that have voiced support for France's actions, said Mr Fabiani, and Libya is the most vulnerable of these.

Before its civil war, Libya exported 1.6 million barrels of oil per day, making it North Africa's biggest exporter.

It is close to reaching this output again.

The bulk of the country's oil and gas production is located in its vast desert hinterland, often in proximity to its poorly controlled borders, leaving the infrastructure exposed.

The Ain Amenas terrorists are said to have passed through Libya on their way to Algeria.

"What are the implications [of Ain Amenas] for a country in which militias are in charge?" Mr Fabiani asked.

During Libya's civil war, loyalists to Muammar Qaddafi were able to strike at oil and gas installations in rebel-held territory with impunity.

"Will the Libyans be able to defend installations given that their security forces are still being put together?" asked Robin Mills, head of consulting at Manaar Energy and a columnist for The National.

Libya was able to ramp up production back to prewar levels remarkably quickly, but the security situation remains precarious enough to reverse this trend with equal speed, he said.

Ain Amenas produces about 10 per cent of Algeria's gas, but the government claims that exports were not greatly affected by the crisis as production was increased at other sites.

Some experts are less sanguine about the future of international oil companies in Alergia's hydrocarbon sector.

"Ain Amenas showed that not just hostages but the site itself had become a target, and multinationals are already re-thinking their future plans," said Virginia Comolli, a research associate at the London-based International Institute for Strategic Studies.

"However, it has to be remembered that throughout the 90s, in spite of the ongoing civil war, the Algerian government managed to ensure uninterrupted gas and oil supply to Europe thanks to substantial security deployments."

Yesterday, the Algerian energy and mines minister, Youcef Yousfi, played down worries that the sector could be affected long-term.

"I don't think foreign workers are leaving Algeria definitively. They have left just to reassure their families," Mr Yousfi told reporters in parliament, according to Reuters. "I don't think foreign companies will leave definitively."

fneuhof@thenational.ae