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Energy Companies in North Africa Face Extended Threat to Their Security

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Energy companies operating in North Africa face a long-lasting security threat that is likely to change the way they operate, but isn't likely to dent their commitment to developing the region's vital oil and gas reserves.

The attack by suspected Islamist militants in Algeria's Sahara on the remote In Amenas gas plant run by BP PLC, Statoil ASA and Algerian state oil company Sonatrach--and the army's subsequent response--left scores dead and highlighted a formidable new threat for oil companies investing throughout the region.

Until last Wednesday's attack, which was unprecedented in its scale and ferocity both for the Algerian and global energy industry, companies including Sonatrach, Total, GDF Suez, BP, Statoil, Cepsa and Repsol had been exploring for or producing oil and gas in Algeria's heavily militarized southern desert area for years without major incident.

In fact, the remote locations were seen as a strength, with many oil companies likening desert operating conditions to those seen on offshore production rigs, said Claire Spencer, head of Middle East and North Africa at U.K. policy institute Chatham House.

Now the region itself, which shares long porous borders with unstable and turbulent countries that include Libya, Mali and Niger, has become the threat as once disparate militant Islamist groups across the region appear to have coalesced and strengthened following the war in oil-rich neighbor Libya.

Algeria and Western oil firms beefed up protection of the country's critical energy industry and dispatched more Algerian military forces after the deadly attack at In Amenas.

Algerian army battalions of at least 500 men each have been sent to protect every oil and gas installation, said Derrouiche Messaoud, a trade-union leader at the Hassi R'Mel natural-gas hub in the Sahara and a Sonatrach employee.

A U.S. government security assessment of the incident obtained by The Wall Street Journal, said that foreign energy companies operating in Algeria's Sahara region are already taking steps to reduce their exposure to attacks by reducing personnel and travel to the country, prohibiting road travel and considering concentrating their staff in one location in case of the need for a full-scale evacuation.

The fact that a relatively small group of militants could attack a critical plant that was already protected by the Algerian military and other government and private security forces has shaken investors, said Economist Intelligence Unit analyst Edward Bell.

"Algeria will struggle to rebuild the confidence that it offers a safe operating environment for workers at its remote oil and gas facilities," Mr. Bell said.

Keeping oil and gas flowing from the region is crucial, not only for consumers in Europe and the U.S., but also for the exporting nations themselves that are highly dependent on the revenues for budgets that include big spending plans to keep potentially restive populations in check.

U.K. Prime Minister David Cameron said over the weekend that the fight against terrorism in North Africa would require a response that is not about months, but about years and even decades, the British Broadcasting Corp. reported.

But Statoil's Chief Executive Helge Lund told thousands of Statoil employees at a town-hall meeting earlier Monday that the Norwegian oil and gas industry wouldn't be deterred from its international investments, although it would need to define its way forward.

"This act of violence is a crossroads, for the global oil and gas industry, for our organization, our culture and the quality of our leadership," Mr. Lund said.

Both BP and Statoil declined to detail the steps they are taking to secure sites and facilities across the region and globally.

BP, which said it would keep the security situation across the region under close review in the coming days, has already withdrawn more than 35 of the 56 BP expatriate employees who were working in locations throughout the country as "a precautionary measure." Statoil has pulled out 51 of its staff from Algeria.

Royal Dutch Shell, BG Group, Eni SpA, Total and Chevron Corp. also declined to give details about security measures at their facilities in North Africa, Nigeria, Angola and elsewhere.

A wholesale withdrawal of companies from Algeria--or indeed from neighboring Libya, gas exporter Egypt, Tunisia and West African oil producer Nigeria, which is also battling Islamist militancy in the north of the country--is unlikely, given the importance of the assets to the companies' bottom line, say analysts.

BP Chief Executive Bob Dudley said his company was still committed to Algeria and its "high-quality assets."

Some companies could struggle to recruit Norwegians to work in risky countries following the Algeria crisis, said Roy Erling Furre of the Norwegian oil and gas union SAFE.

But Jake Molloy, the leader of the U.K.'s main offshore oil workers' union, said that workers would still go if the price was right.

"Money is a great leveler," he said, citing one worker who was kidnapped and ransomed in Nigeria, but returned to work elsewhere in a high-risk African country.

Kjetil Malkenes Hovland in Oslo and Geraldine Amiel in Paris contributed to this article

Copyright (c) 2012 Dow Jones & Company, Inc.

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