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Energy Firms Seek New Answer to Security Risks

This month's attack on an Algerian gas plant is forcing global oil giants to rethink protection of oil fields from the Middle East and Africa, a new reality that could potentially boost the cost of crude production.

Energy Firms Seek New Answer to Security Risks Energy Firms Seek New Answer to Security Risks

This month's attack on an Algerian gas plant is forcing global oil giants to rethink protection of oil fields from the Middle East and Africa, a new reality that could potentially boost the cost of crude production.

Major oil companies have long been a target of kidnappings and low-level sabotage, but the unprecedented scale of the Algeria attack will likely result in new levels of protection.

The growing threat was underscored again late Sunday when unknown attackers assaulted guards protecting an Algerian natural-gas pipeline on the southern edge of Kabilya, an al Qaeda stronghold, leaving three dead and wounding others, an official with Algerian state-oil company Sonatrach said.

Meanwhile, BP said the Algerian attack had prompted it to review plans to start exploratory drilling for oil and gas in neighboring Libya later this year. "No decisions have been taken," a spokesman said.

The latest developments are part of a broader backdrop of jitters in the oil industry after an assault by suspected Islamist militants on the remote In Amenas gas plant in Algeria's Sahara, which is run by BP, Statoil and Sonatrach, left at least 37 foreigners dead.

The new threat represented by the In Amenas attack has prompted what one senior industry executive operating across North Africa called a "sea change in the reality of risk."

In an illustration of that broad impact, the chief executive of one of the world's largest oil companies, Royal Dutch Shell, said he met with representatives of several other major oil companies and government officials at the World Economic Forum in Davos to discuss new security measures.

"Already, some initiatives are under way," said Shell CEO Peter Voser. "We haven't worked out the mechanisms needed yet, but we will do that."

The need for a quick response to the attack is most urgent in Libya, Algeria's neighbor and a key supplier of high-quality crude and natural gas to Western markets.

"The security in Libya is not sufficient to repel an attack of the sort that happened in Algeria," said Alan Fraser, the Libya risk analyst at consultancy Ake Group.

"Libya is so relaxed there's virtually no security and that will have to change now," said a senior security expert familiar with operations in the region.

Last week, the U.K. Foreign Office urged British citizens to leave the Libyan oil-industry hub of Benghazi, citing a specific and imminent threat to Westerners.

"We are increasing the number [of security forces] near the oil fields and in near the [Algerian] border," said a spokesman for the country's interior ministry, without confirming any specific threat.

Nigeria, which has long struggled with Islamist violence, could also be more vulnerable than the authorities realize. Frequent terrorist attacks in the country's north by Islamist group Boko Haram and Nigeria's support for the French operations against the militants in Mali may well distract the country's security services from a risks in the main oil-producing region in its South, said Philippe de Pontet, director for Africa at U.S.-based risk consultancy Eurasia Group.

Attacks against oil companies in the south a few years ago shut half of the country's output--the largest in Africa. But violence has now moved to the Muslim north and there are fears it could fear to the capital, Abuja, in central Nigeria.

France's Total  said Friday it was pulling staff out of Abuja after a kidnapping on the border of Niger of a French national in December.

Shell, Eni, Total and Chevron declined to give details about security measures at their facilities including those in North Africa, Nigeria and elsewhere.

Industry insiders and security experts say the good news is that the world's largest oil exporter, Saudi Arabia, is better prepared than any country to deal with assaults on the scale of In Amenas, because of previous experience repelling terrorist attacks on its own facilities.

"There is a very low chance that Saudi Arabia...could see a similar attack to that of Algeria," said Theodore Karasik, director of research at the Institute for Near East and Gulf Military Analysis.

Despite repeated calls from al Qaeda for attacks on oil facilities in the Persian Gulf to disrupt oil flows to the West, Saudi Arabia has kept its oil industry safe.

In 2006, the kingdom foiled an attack on the world's largest oil-processing facility at Abqaiq. At least two cars carrying suicide bombers tried to storm the plant, but the attackers were killed less than a mile from the main entrance by security forces.

If the kingdom were to suffer a successful attack, it would most likely be on a small scale, such as the bombing of a pipeline, said Mr. Karasik.

Iraq, which has long suffered large-scale al Qaeda attacks on its civilian population, has also kept its main oil facilities safe, with protection provided by a mixture of Western private security firms and local armed forces.

"Our oil installations are well protected," said Iraqi deputy oil minister Fayadh al-Niama. "We have also recruited security and intelligence forces that help us to prevent such incidents."

The In Amenas attack will also force the oil and gas industry to think out of the box about the nature of potential attacks and undertake a far-reaching review of security, said the senior security expert.

At the very least, the level of fortification, security manpower, and thoroughness of background checks on staff will have to be increased, adding expense to an industry already suffering high costs, said several security experts.

Algerian intelligence officials say they are investigating the possibility that several current or former employees--possibly drivers or security officers--may have provided critical information on the In Amenas plant to the terrorists.

"The potential use of an insider is a significant feature that will certainly put additional pressure on screening and clearance of locally-employed personnel," said Justin Crump, chief executive of Sibylline Ltd, a risk-analysis consultancy focused on terrorism.

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