A look at North Africa: Algeria’s troubles

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If investors weren’t already rattled enough by the prospects of dealing with the time-consuming bureaucracy of Algeria’s red-taped system, it now seems that they will also have the added possibility of an Islamist militant resurgence on their minds.

by Justin Calderon

In mid-January 2013, a bloody hostage crisis at a gas plant operated by British oil major BP, Statoil and Algeria’s government-owned hydrocarbons company Sonatrach grabbed international headlines. In the aftermath of the death of dozens of hostages from eight nationalities, as well as Islamist militants claiming to be a part of Al Qaeda, BP quickly removed all “non-essential” personnel from across their operations in the country.

One of the most dramatic hostage events in recent history, the crisis may have been the straw that broke the camel’s back for prospective investors hoping for more stability in the region. The events that unfolded now add an unknown amount of risk and costs to maintaining a workable security situation in the region’s major hydrocarbon industry.

In the post-crisis analysis, the Algerian government’s expedient  and myopic moves to use air strikes and inordinate aggression will likely continue to come under fire by international bodies and the global business community.

Trans-Sahara pipeline

An additional result of the debacle will be the precarious future of the Trans-Saharan gas pipeline (also known as NIGAL pipeline and Trans-African gas pipeline), a project promoted by Nigera and estimated to cost $12 billion. The project involves the running of gas pipelines from Calabar in Nigera to Niger into Algeria and onward to Spain, with the plans of supplying up to 30 billion cubic meters of natural gas to Europe annually.

Any previous assumptions of how safe operations would be have been are dashed after the breach in security. The heightened risk will now likely send the estimated price tag of the project soaring, analysts predict.

Nigeria, Niger and Algeria are among the least secure areas in the region because of various active terrorist movements that destabilise them. With Mali erupting in rebellion through the capital of Timbuktu, a safe haven has been established with which to mount additional assaults.

However, the Nigeran government has gone on the record stating that if proper security is put in place there should be no reason why the Trans-Saharan pipeline should be stalled.

“Although the security concerns are heightened, I believe that the beneficiaries of the gas pipeline, which includes Algeria knows the importance of the project, so they will protect it to the latter,” International Society For Energy and Environmental Development President Akisola Cole told media.

Several European energy giants, among them Royal Dutch Shell, ENI of Italy and Total of France, have expressed interest in buying into the project but none have fronted up with any money.

The EU also adamantly supports the project as it would allow the group of nations to shake its reliance on Russian resources by directly digging into Nigera’s 5 trillion cubic meters of natural gas output.

Oil companies are among the most capable of dealing with high-risk situations in fragile areas. How much they are willing to wager on the deteriorating security situation in the region may be a gamble that only African firms are willing to take.

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Reading Time: 2 minutes

Click to enlarge

If investors weren’t already rattled enough by the prospects of dealing with the time-consuming bureaucracy of Algeria’s red-taped system, it now seems that they will also have the added possibility of an Islamist militant resurgence on their minds.

Reading Time: 2 minutes

Click to enlarge

If investors weren’t already rattled enough by the prospects of dealing with the time-consuming bureaucracy of Algeria’s red-taped system, it now seems that they will also have the added possibility of an Islamist militant resurgence on their minds.

by Justin Calderon

In mid-January 2013, a bloody hostage crisis at a gas plant operated by British oil major BP, Statoil and Algeria’s government-owned hydrocarbons company Sonatrach grabbed international headlines. In the aftermath of the death of dozens of hostages from eight nationalities, as well as Islamist militants claiming to be a part of Al Qaeda, BP quickly removed all “non-essential” personnel from across their operations in the country.

One of the most dramatic hostage events in recent history, the crisis may have been the straw that broke the camel’s back for prospective investors hoping for more stability in the region. The events that unfolded now add an unknown amount of risk and costs to maintaining a workable security situation in the region’s major hydrocarbon industry.

In the post-crisis analysis, the Algerian government’s expedient  and myopic moves to use air strikes and inordinate aggression will likely continue to come under fire by international bodies and the global business community.

Trans-Sahara pipeline

An additional result of the debacle will be the precarious future of the Trans-Saharan gas pipeline (also known as NIGAL pipeline and Trans-African gas pipeline), a project promoted by Nigera and estimated to cost $12 billion. The project involves the running of gas pipelines from Calabar in Nigera to Niger into Algeria and onward to Spain, with the plans of supplying up to 30 billion cubic meters of natural gas to Europe annually.

Any previous assumptions of how safe operations would be have been are dashed after the breach in security. The heightened risk will now likely send the estimated price tag of the project soaring, analysts predict.

Nigeria, Niger and Algeria are among the least secure areas in the region because of various active terrorist movements that destabilise them. With Mali erupting in rebellion through the capital of Timbuktu, a safe haven has been established with which to mount additional assaults.

However, the Nigeran government has gone on the record stating that if proper security is put in place there should be no reason why the Trans-Saharan pipeline should be stalled.

“Although the security concerns are heightened, I believe that the beneficiaries of the gas pipeline, which includes Algeria knows the importance of the project, so they will protect it to the latter,” International Society For Energy and Environmental Development President Akisola Cole told media.

Several European energy giants, among them Royal Dutch Shell, ENI of Italy and Total of France, have expressed interest in buying into the project but none have fronted up with any money.

The EU also adamantly supports the project as it would allow the group of nations to shake its reliance on Russian resources by directly digging into Nigera’s 5 trillion cubic meters of natural gas output.

Oil companies are among the most capable of dealing with high-risk situations in fragile areas. How much they are willing to wager on the deteriorating security situation in the region may be a gamble that only African firms are willing to take.

Do you like this post?
  • Fascinated
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