* Gas plant siege stirs fear of rising costs
* Parliament votes in long-awaited oil, gas law
* Costs seen rising across North African oil sector
By Emma Farge
GENEVA, Jan 21 Investment in Algeria's oil and
gas sector may fall as concerns about the costs of security
after a bloody siege at a desert gas plant eclipse the impact of
a hydrocarbon law designed to win over foreign firms, executives
and analysts said on Monday.
Algeria's parliament acted quickly on Monday to endorse an
oil and gas law, cancelling a windfall tax on foreign firms, in
a move seen as a bid to reassure foreign investors and reverse
declining interest in the OPEC member.
But executives say the attack, which left more than 60
people dead including many foreign workers, could mean that
investment in Algeria and other oil-producing neighbours such as
Libya and Mauritania lags behind other regions.
"Costs that are already extremely high will become even
higher," said Repsol's Algeria country manager Gabino Lalinde in
a telephone interview.
"Security risks and this new cost escalation will make
Algeria less attractive to international oil firms," he added.
The Spanish firm produces around 8,500 barrels of oil
equivalent per day in the country and has facilities deep in the
southern Algerian Saharan desert and near BP's In Amenas site.
Algeria's oil and gas sector, which accounts for 98 percent
of the country's exports, has struggled to lure in investment in
recent bid rounds as executives eye the booming sectors of Iraq
and east Africa.
Analysts said that Algeria's new law could be too late to
reverse the investment trend.
"The change in the hydrocarbon law has come two-three years
too late. They've already had unsuccessful bid rounds and the
IOCs (international oil companies) have been voting with their
feet," said Charles Gurdon, managing director of Menas
Associates, a political risk consultancy.
Libya and Algeria are Africa's third and fourth largest oil
producers with Libya also the largest oil reserves holder on the
Together with Egypt, they are important gas suppliers to
Alone among its neighbours, Algeria has so far been largely
untouched by uprisings in 2011 that ousted leaders in Egypt,
Libya and Yemen.
Any drop in Algerian investment could have serious
consequences for a country which relies heavily on oil and gas
revenues to pay for its 6 million tonnes a year of grain
imports, seen as vital to ensuring domestic stability.
Oil majors such as BP and Total have been gradually reducing
production in Algeria by either selling assets or letting
existing investments lapse, raising concerns that there will not
be enough new projects to maintain output.
Edward Bell of the Economist Intelligence Unit said that
declining investment in Algeria's the oil and gas sector could
affect spending on infrastructure and social projects.
"For now Algeria has comfortable reserves, but in the longer
term its fiscal position could be impacted," he said, adding
that youth unemployment - a feature of Arab Spring countries -
also plagues Algeria.
Libya ranked 12th and Algeria 13th out of 17 major economies
in the Middle East and Africa in a survey by the Economist
Algeria needs an oil price of $121 to balance its books,
according to a November estimate from the International Monetary
Fund, as falling oil production and low gas prices hit earnings.
The chief executive of Statoil, which is still missing
workers at the Algerian gas facility, said on Monday that the
attack represented a "crossroad" for the global oil and gas
industry that would raise many questions.
"We have a responsibility to run our business and support
daily operations ... we cannot and will not let a terrorist
attack interfere in our determination," Helge Lund told a news
BP has evacuated workers from Algeria and an industry source
said that other firms had taken steps to remove foreign
employees from desert sites.
Neighbouring Libya has also beefed up security in its oil
fields and energy firms were considering similar measures in
Egypt as Islamist militants threatened to attack new
instillations in north Africa.
The In Amenas attack, which occurred close to the border
with Libya, could also have implications for that country's oil
and gas sector as long-standing clients begin to show
frustration at supply disruptions caused by protests and
"The industry is going to assume that everything in North
Africa is affected in terms of security, including Libya and
also Morocco and Mauritania," said Gurdon.
Some Libyan oil fields such as Italian group Eni's
Elephant are located several hundreds of kilometres across the
desert from In Amenas, where the hostage tragedy unfolded this
Several U.S. oil firms have yet to return to resume
exploration in Libya after the 2011 conflict due to security
"Should Libya be subject to similar attacks by Al Qaeda in
the Islamic Maghreb, we see a particular downside risk to Libyan
output prospects for this year and for longer-term production
prospects, as foreign firms will be reluctant to resume
exploration and return expatriates to Libya," said Amrita Sen,
Chief Oil Analyst at consultancy Energy Aspects in London.