Energy giants will be rethinking their presence in the region after Islamist fighters seize foreign workers at Algeria's In Amenas field, an energy security analyst tells Channel 4 News.
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The In Amenas field is at the heart of an oil and gas region that has attracted international firms in recent years, including BP and Norway's Statoil, who operated the captured plant with Algeria's state firm.
Events this week may change perceptions of an oil industry that has attracted billions of dollars in foreign investment since Algeria's government crushed an Islamist revolt during the 1990s.
That in turn could store up trouble for a government reliant on oil and gas revenues to finance domestic spending.
"For this group to have attacked there, in spite of tremendous security, is remarkable," said Azzedine Layachi, an Algerian political scientist. "Even as an Algerian, I need a special permit to go there."
Geoff Porter, director of North Africa Risk Consulting, said that security had become less and less of a concern for oil companies operating in Algeria. "For the first time in a decade the security situation has plummeted, causing consternation amongst international oil firms."
Algeria is also an important supplier of gasoline rich crude oil to world markets.
The Algerian oil and gas industry is dominated by state oil firm Sonatrach, which employs over 100,000 people. Sonatrach has encouraged foreign investment since the late 1990s, after the end of a civil war which cost an estimated 200,000 lives.
As a result, international oil companies ventured into remote and challenging areas on the border with Mali and Libya, including In Amenas.
But the events of Wednesday and Thursday, the first major attack on Algerian energy assets, looks set to change this. BP, Statoil and Spain's Cepsa are to start evacuating staff, even though some of their projects are located hundreds of kilometres away from the site.
Several oil experts said the biggest risks were for the fields near In Amenas in the southern Illizi province where Eni, BP and Statoil operate.
But most large fields are located far away from In Amenas and are believed to be still well insulated from attacks.
John Hamilton, contributing editor to African Energy, said the security offered by the military to oil companies in the desert had reassured them about basing workers hundreds of miles from the main centres of populations.
He told Channel 4 News that the events of the past few days were "unprecedented", despite the presence of international companies throughout the Algerian civil war in the 1990s.
"Even during a decade of terrorism the way they dealt with it was by deploying a ruthless military machinery, which kept lid on the problem," he added.
"This is humiliating for Algerian military and intelligence. They lost control of their backyard."
Mr Hamilton said that every oil company in the broader region would be reviewing its staffing and working out whether it is safe.
"As far as these companies are concerned, there are only two choices: they either have their employees operating in the desert or they don't.
"They do not organise their own security. If you are sending people out into the desert you have to have faith in the Algerian military."
Wider Sahara region
There is also concern about the effect on the wider region.
Some oil experts speculate that Islamists could next pour over the border into Libya where the military too weak to be efficient," he said.
And with France's military intervention in Mali, risks are on the rise of displacement of jihadists, many of whom will likely look to Libya for refuge.
Mr Hamilton said that concern was that if can happen in Algeria, which has a military with a "feared reputation", then it can happen in fractured, post-Gaddafi Libya.
"I am sure it will have an effect on Libya, it is right up against the border with Libya, he said, noting that In Amenas hostage takers Al-Mulatahemeen were said to have come in via Libya.
He added: "It's inevitable that companies with personnel in these far-flung places will reconsider."
Richard Mallinson, from Energy Aspects consultancy, said: "The worst case would be that the interim Libyan government breaks down and we see a return of large-scale fighting between tribes and factions, with Libyan production dropping off significantly."
Energy companies active in the Sahara region
Spain's Cepsa has become a significant foreign player in Algeria, and says it is responsible for 17 percent of the country's output, producing 220,000 barrels per day from a group of fields near the Libya-Tunisia border. The fields, including the country's second biggest oilfield Ourhoud, are located some 300 kilometres north of In Amenas.
Repsol has planned gas production in Algeria from 2016 onwards. Repsol lists Algeria's Illiza province as one of its most important areas of exploration globally.The Spanish energy company already has a presence through Gas Natural Fenosa, which maintains business relations for the buying and selling gas in Algeria.
Algeria's third largest gas field In Salah, is jointly operated by the Norwegian company, BP and Sonatrach. Production capacity is 9 billion cubic metres per year. The first gas was delivered in August 2004. The same team operates In Amenas, where the hostage crisis took place. Statoil is also involved in oil production in Libya.
BP, along with Algerian company Sonatrach, are Statoil's partners in the In Salah and In Amenas oilfields. The British company has been operating in Algeria since the mid-1950s and is also involved in exploration in the Bourarhet block, adjacent to In Amenas.
Russian energy giant Gazprom is exploring opportunities in Algeria in partnership with Sonatrach at the Berkine Basin, close to the border with Tunisia.
The Italian company is responsible for producing 70,000 bpd of oil in Algeria. It has also started exploration in Mali, but pulled out this week citing a poor prospecting outlook.
18 January 2013
18 January 2013
22 July 2010