Algerian government seeks to salvage energy trade after attack

The Independent – 26 January 2013

Until a few days ago, workers at the In Amenas gas plant in the Algerian Sahara lived a simple, if confined life. Working 12-hour shifts and seven-day weeks offered little opportunity for leisure.

But when there was down time, workers had at their disposal state-of-the art training and sports facilities, including a football pitch, swimming pool and fitness rooms. Card-playing was another popular pastime, and one that fostered a competitive spirit every bit as strong as that on the football field.

“There’s a lot of friendly rivalry there,” says Gerry Peereboom, head of BP operations in Algeria from 2005-09. “The Brits play the Norwegians at soccer, and the expats play the Algerians. Rivalries extend to the pool, to card games and to everything else.”

Working long shifts in a remote and cloistered environment bred a strong sense of camaraderie at the plant. “It’s very competitive, but it’s all done in a friendly spirit,” says Peereboom. “People develop very close relationships there. It’s a close knit group.”

Until the plant came under attack last week, there was little reason to believe that the safety of workers at In Amenas was at serious risk. In the 55-year history of Algeria’s oil and gas industry there had never been a major attack on an oil and gas facility, despite a decade-long civil war in the 1990s that claimed an estimated 200,000 lives.

Security at the plant is extremely tight. Whenever workers leave the compound to travel to the nearby airport or to work on the gas fields, they are escorted by Algerian security forces. The compound is protected by a perimeter fence several hundred metres away, a second inner fence, and armed patrols.

The site itself offers natural protection from outside intrusion. Two sides of the facility are protected by a cliff drop that it would be difficult to scale unobserved. On the other two sides there is a clear view all the way to the horizon. “It’s a very secure site,” says Peereboom.

How such a comprehensive security set-up could be breached remains a mystery. But the fact that it was breached is a huge blow for a government that derives much of its legitimacy from its success in combating Islamic terrorism, and takes great pride in the experience of its military and security services.

“It’s like a mother losing her son,” says a former employee of Sonatrach, the government-owned oil company that partners with BP and Norway’s Statoil on the project.

The shutdown of the In Amenas plant has economic repercussions too. The facility accounts for about 10% of Algeria’s gas output and more than 15% of its exports. The gas produced from the field is worth between $5m-10m a day.

Algeria’s energy minister Youcef Yousfi said on Sunday that the plant could resume production “in the next few days”, but BP and Statoil are more cautious. “The site is still part of the crime scene – it will take a while,” Sheila Williams, a spokesperson for BP in London, told the Independent. Morten Eek, a spokesman for Statoil, said that the company has “no indications” of the start-up date.

A former energy minister, Chakib Khelil, has claimed that “most of the day-to-day operations” can be carried out by local personnel. A source with knowledge of the project confirms that this is the case, but warns that although local staff “have some good expertise” they still “clearly need help” from more technically qualified expatriate workers.

The government has insisted that the loss of output from In Amenas can be covered from other gas fields, while Spain and Italy have reported that gas deliveries from Algeria are above average for the month to date.

But the reputational impact on Algeria of the security breach at In Amenas could be much more damaging. Algeria’s hydrocarbons sector accounts for about two-thirds of the country’s economy and 97% of its export income. A lack of exploration and rapid growth in local energy demand in recent years has put the government under huge pressure to accelerate its exploration and development programme.

As Algeria’s hydrocarbons resources become ever more difficult to access, it is increasingly reliant on international companies to partner in their exploration and development. These companies need to know that the government can guarantee their safety.

Statoil and BP both say that they intend to maintain their business in Algeria. But both have underlined the need for new security guarantees. “We are committed to operations there, but safety is the number one priority of all our operations,” says Eek. “We won’t be sending anyone back to the facility without being able to ensure their safety.”

A statement released by BP on 22nd January insisted that the company “remains committed to operating in Algeria.” But the company has evacuated all of its staff from the country, including those based in Algiers. “When they return will be decided at a later date,” says Williams. “They have been through an extremely hard time.”

Whether the appetite of other companies to invest in Algeria, or to continue existing operations there, will be affected remains to be seen. Algeria’s oil and gas fields are scattered across the Sahara, and some of the country’s most promising new gas developments are within 300km of the border with Mali.

On Monday, Algeria’s parliament passed a series of amendments to the country’s oil and gas licensing regime for foreign companies operating in the country. The terms are appealing, say analysts. At the moment, though, security concerns will come first.

This article was first published by The Independent on 26 January 2013. To view the original online, click here.

Leave a Reply

Richard Nield is a freelance journalist, photographer and filmmaker covering the Middle East and Africa. In 10 years covering the region, he has been published and broadcast by clients including the BBC, Reuters, Al Jazeera, The Economist, The Financial Times, The Independent and Foreign Policy magazine. He has reported from throughout the region, including Algeria, Egypt, Libya, Morocco, Tunisia, South Sudan, Jordan, Lebanon, Syria, Kuwait and Saudi Arabia.