Bloomberg News

Algeria Attack No Outlier as Oil Targeted 3 Times a Week: Energy

January 23, 2013

Algeria Attack No Outlier as Oil Targeted 3 Times a Week

The bloodiest attack came in 2007 when 72 people died after a secessionist group in Ethiopia overran a camp run by China Petroleum & Chemical Corp., according to the University of Maryland’s Global Terrorism Database. Photographer: Tomohiro Ohsumi/Bloomberg

While the attack in Algeria that killed at least 38 hostages was the deadliest raid on the oil industry in five years, it’s far from unprecedented.

From Colombia to Yemen, oil workers have suffered violence for decades as militants strike an industry seen symbolizing political and economic power. The bloodiest attack came in 2007 when 72 people died after a secessionist group in Ethiopia overran a camp run by China Petroleum & Chemical Corp. (600028), according to the University of Maryland’s Global Terrorism Database. Each week about three attacks were made worldwide on oil employees and installations in 2011, the data show.

“This attack has surely got some attention, but I wouldn’t say it’s an outlier,” said Gal Luft, co-director of the Institute for the Analysis of Global Security in Washington. “If you want oil and gas you have to go to these places. This is the cost of doing business.”

Oil companies, and the states where they work, tend to react to attacks by improving security rather than scaling back operations, said Charles Bird, a former U.K. diplomat who’s now a fellow at St. Andrews University. Saudi Arabia responded to terrorist threats by establishing a special force of 35,000 to defend oil installations. Producers use private security contractors to protect people and plants in dangerous countries.

‘Remain Committed’

“We have high-quality assets in Algeria, where we’ve been present for 60 years,” said David Nicholas, a spokesman for BP Plc (BP/), joint operator of the In Amenas plant attacked last week. “We remain committed to operating there.”

BP said yesterday that four unaccounted for workers may have died. It has evacuated 14 of the 18 workers who were on the site when it was attacked.

“In many years of terrorism, Algeria has never seen an attack of this scope,” said Abdennour Benantar, associate professor at the University of Paris VIII. “The government will step up security and oil companies will likely remain. There’s much money to be made.”

Royal Dutch Shell Plc (RDSA), Exxon Mobil Corp. (XOM:US) and Italy’s Eni SA still operate in Nigeria after years of kidnappings, raids on oil platforms and pipeline bombings by militants demanding a greater share of oil wealth. Paris-based Total SA (FP) continues to work in Yemen in the face of regular attacks. BP remained in Colombia as rebel groups targeted the industry, including a pipeline explosion that killed 45 people in 1998.

“Companies will still be attracted to places with high risks because they offer higher returns,” Chakib Khelil, who was Algerian oil minister from 1999 to 2010, said in a phone interview from Washington. “They need to look at what went wrong, and what was the defect in security and reinforce it. That’s all you can do.”

Pertamina

PT Pertamina, Indonesia’s state-owned oil company, will proceed with a $1.75 billion bid to buy stakes in three Algerian oil fields from ConocoPhillips, a deal agreed before the attacks, Ali Mundakir, vice president of corporate communications, said at a conference in Jakarta yesterday.

Groups linked to al-Qaeda have targeted the oil industry. In 2004, Osama bin Laden declared energy installations a legitimate target because higher oil prices would damage economies in the U.S. and Europe, according to Daniel Yergin’s “The Quest,” a contemporary history of the energy industry.

In 2006, Saudi Arabian insurgents tried unsuccessfully to attack the Abqaiq oil processing plant, which handles 8 percent of the world’s crude oil production, according to Yergin. That followed the 2004 killing of 22 foreigners at two oil industry buildings at Khobar on the Gulf coast.

North Africa

Last week’s attack was carried out by a group led by a former leader of al-Qaeda in the Islamic Maghreb, raising concern of an Islamist campaign against the industry across northern Africa. Algeria’s neighbor Libya, where government control remains flimsy after 2011’s overthrow of Muammar Qadaffi’s regime, is also a major oil and gas producer.

“It’s the strength and severity of this attack that’s shocking,” said Valerie Marcel, a fellow at London-based think tank Chatham House who’s based in Toronto. “It shows a security vacuum in the desert. It means that oil facilities in Libya and elsewhere in Algeria are bigger potential targets than we thought.”

The figures taken from the Global Terrorism Database figures include attacks on pipelines, wells and oil companies. They exclude attacks on gas stations or government officials working in the oil ministry.

“It doesn’t mean people are going to invest less, there’s still a lot of money to be made of out of oil and gas,” said Bird, a fellow at St. Andrews’s Center for the Study of Terrorism and Political Violence. “It will mean that costs will be higher because of problems of providing security.”

Statoil ASA (STL), who operates In Amenas with BP and the Algerian state oil and gas company Sonatrach, said it will remain in the country.

“We neither will nor can let terrorism dictate our strategy or our choices,” Chief Executive Officer Helge Lund said Jan. 21. “We have a responsibility to run our business and support daily operations.”

To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net


The Good Business Issue
LIMITED-TIME OFFER SUBSCRIBE NOW

Companies Mentioned

  • XOM
    (Exxon Mobil Corp)
    • $93.78 USD
    • -0.81
    • -0.86%
Market data is delayed at least 15 minutes.
 
blog comments powered by Disqus