* In Amenas is first big attack on Algerian energy
* Oil sites had benefited from military-style security
* Fears rise attacks could spread to Libya's West
By Alex Lawler and Julia Payne
LONDON, Jan 17 Algeria's In Amenas field, where
Islamist fighters seized dozens of foreign workers this week, is
at the heart of an oil and gas region that has attracted
international firms in recent years partly because of its
"For this group to have attacked there, in spite of
tremendous security, is remarkable. Even as an Algerian, I need
a special permit to go there," said Azzedine Layachi, an
Algerian political scientist.
Events this week may change perceptions of an oil industry
that has attracted billions of dollars in foreign investment
since Algeria's government crushed an Islamist revolt during the
1990s. That in turn could store up trouble for a government
reliant on oil and gas revenues to finance domestic spending.
Algeria is also an important supplier of gasoline rich crude
oil to world markets.
The In Amenas gas facility operated by BP, Norway's
Statoil and OPEC member Algeria's state firm was
attacked by militants on Wednesday.
They kidnapped dozens of foreigners in retaliation for
France's intervention in Mali. After a military raid on Thursday
to end the crisis, an Algerian security source said at least
seven foreigners were among 30 hostages killed.
"Over the last decade security had become less and less of a
concern. For the first time in a decade the security situation
has plummeted, causing consternation amongst international oil
firms," said Geoff Porter, director of North Africa Risk
In Amenas became the first major attack on Algerian energy
assets, prompting BP, Statoil and Spain's Cepsa to start
evacuating staff even though some of their projects are located
hundreds of kilometers away from the site.
The Algerian oil and gas industry is dominated by state oil
firm Sonatrach, which employs over 100,000 people. It operates
the biggest oil and gas fields including the country's No.1 oil
deposit Hassi Messaoud, located in the centre of the country.
Sonatrach has encouraged foreign investment since the late
1990s after the end of a civil war, which cost an estimated
As a result, oil majors ventured into remote and challenging
areas on the border with Mali and Libya, including In Amenas.
"The military was providing its own security to oil
companies in the desert and people were fairly comfortable about
flying down to the desert," said John Hamilton of CBI Research,
an Africa specialist.
RISKS FOR LIBYA
In the past years, Spain's Cepsa has become a significant
foreign player in Algeria and says it is responsible for 17
percent of the country's output, producing 220,000 barrels per
day from a group of fields near the Libya-Tunisia border.
The fields, including the country's No.2 oilfield Ourhoud,
are located some 300 kilometres north of In Amenas.
U.S. Anadarko operates fields in the same area with
Cepsa with its own share of output being 60,000 bpd.
Other large foreign investors include Italy's Eni,
responsible for producing 70,000 bpd, as well as BP, Statoil,
Total and Maersk, each producing in the area of
Industry sources said every oil company was employing dozens
of expatriates all of whom were usually flown in for short
rotations taking several weeks. BP, Statoil and Cepsa all said
they had begun to evacuate personnel from Algeria.
Large oil service companies such as Halliburton also
employ international staff.
Most large fields are located far away from In Amenas and
are believed to be still well insulated from attacks.
Several oil experts said the biggest risks were for the
fields near In Amenas in the southern Illizi province where Eni,
BP and Statoil operate. They include deposits such as Eni's
Zarzaitine or Total's Tin Fouye further West.
Repsol lists Illiza province as one of its most important
areas of exploration globally.
Sam Ciszuk from KBC consultancy said he believed a number of
fields near In Amenas would be evacuated.
"The more worrying scenario is that the Islamists next pour
over the border into Libya. The Libyan government is fractured
and the military too weak to be efficient," he said.
He added that although most of Libya's fields are in the
east, Western deposits were producing up to 300,000 bpd. The
biggest field include Eni's Elephant and Conoco's Waha. Libya's
production was halt during the 2011 civil war.
With France's military intervention in Mali, risks are on
the rise of displacement of jihadists, many of whom will likely
look to Libya for refuge.
"The worst case would be that the interim Libyan government
breaks down and we see a return of large-scale fighting between
tribes and factions, with Libyan production dropping off
significantly," said Richard Mallinson from Energy Aspects