The safety and security of an oil or gas field and its personnel is an important consideration in a country, but especially so when it is in an area of potential or ongoing conflict. Energy is a commodity integral to the economic security and growth of a nation, which means that it is often a primary target for parties looking to undermine the state’s stability. The disruption of pipelines, pumps, storage facilities, and export terminals can wreak havoc on the local energy grid and potential export revenue of a country. However, the scope of potentially damaging conflict is not limited to full-scale war or revolution; small scale pushback by local communities in oil and gas operational areas also present a business risk that international oil companies (IOCs) cannot afford to ignore.
An IOC looking to start operations in a dangerous or potentially dangerous area has to consider the possible operational losses, given that their work could be the target of attacks. It also must consider the potential for their activities to exacerbate or spark any conflict in the area. Lastly, but by no means least, they must have systems in place to ensure the protection and safety of its workers.
Given their sensitive nature, an IOC is often not willing to release the exact details of their plans for a given region, the release of which could compromise ongoing operations. OMV, an Austrian oil and gas company operating in Libya, told Egypt Oil & Gas that they would not share information on the topic for security reasons. However, IOCs often have an overarching policy on the specific actions necessary to establish the security of assets in a conflict zone. The security policy framework is then modified for the specifics of a given country.
Country Entry Check and Risk Assessment Systems
The first stage of an IOC’s security policy is establishing whether or not to commence operations in an area of present or potential conflict. OMV refers to this process as a ‘Country Entry Check’.
The Country Entry Check involves the IOC commissioning a comprehensive impact assessment externally, evaluating the environmental impacts, effects on local community and society as well as the human rights situation in the target country. OMV then works with “internationally acclaimed experts and local, national, and international stakeholders” in order to develop measures to reduce any negative impacts of their potential work in the country as well as understanding and strengthening any positive effects it can have in the region.
A 2008 report from the International Petroleum Industry Environmental Conservation Association (IPIECA) detailed measures to ensure safety and security in conflict zone operations, which can “assist companies to avoid costly mistakes by alerting them to existing or emerging conflict issues and by informing both investment decisions and successful conflict management strategies.”
The report states that IOCs must establish risk assessment and risk management systems which monitor the conflict situation and dynamics in an area of operation over time, continuously assess impacts of conflict in investments and vice versa, and provide input to conflict management responses. A major part of these risk management protocols is to look at how corporate policies and practices affect the dynamics of the conflict. This takes the form of ensuring a company’s actions and behavior of its personnel do not exacerbate existing conflict or cause new conflict.
The initial risk assessment can include an Above Ground Review (AGR), which evaluates and anticipates whether a country is in a “pre-conflict phase.” Factors in identifying an imminent or growing conflict, particularly aimed against an IOC, are established by engaging governments, nongovernmental organizations (NGOs), and communities and can include expressions of grievance and frustrations amongst communities over an IOC’s operations, leading to demonstrations, vandalism and potential violence by a local community against the IOC. High levels of gun crime in operational areas is also considered a warning sign, alongside weak or biased government law enforcement.
The basic principle of mitigating local dissent against an IOC is community engagement, often taking the form of corporate social responsibility (CSR) initiatives, which aim to provide support to local communities by distributing the benefits of an IOC’s presence in the area through jobs and developmental assistance. In the Matrouh area of Egypt’s Western Desert, Apache, in partnership with the Ministry of Education, built six schools as of 2014; previously, the closest was 10 km away.
The “do something” approach to situations of violent conflict is often taken by companies looking to take a more active role in the external environment to ensure security and safety for its assets and personnel. It involves bolstering the company’s front-line and secondary conflict management capabilities, establishing early warning systems in zones of frequent direct conflict.
The IPIECA report also describes a more substantial “do something ++” strategy for areas where an impact of conflict is more significant. This includes supporting local and national conflict management capacities through providing training and funding assessments of the situation, as well as providing funding and technical assistance to conflict resolution efforts.
Risk-Reward Imbalance
Conducting oil and gas operations in a conflict zone is based off a risk-reward dynamic that is easily overturned in the case of large-scale violent conflicts. The security measures detailed in the IPIECA report concerns only small-scale violence and local dissatisfaction regarding an IOC’s operations. In the case of large conflicts, some of the proactive measures mentioned above may have little effect.
In October 2018, sources told S&P Global Platts that the deteriorating security situation around Libya’s largest oil field, Sharara, caused the country’s crude oil output to fall once again. Increased militia activity caused some oil workers to evacuate fields, with output from the field dropping drastically over the course of days. Earlier, in mid-July, the national oil company (NOC) closed Sharara after gunmen infiltrated the area and kidnapped four staff members. The oil company also recently declared a force-majeure on exports at its Zawiya terminal.
In the same month, at least ten Iraqi security forces were killed in an attack by Islamic State (IS) militants on the Akkas gas field in the western province of Anbar.
Cases such as these represent a more serious problem for IOCs; large scale organized attacks are not easily mitigated with community outreach programs and voluntary human rights principles. As is often the case when the risk of violence increases, IOCs may decide to withdraw from the country and relinquish operational rights.
As the ongoing war in Yemen was escalating in 2015, many IOCs that had remained steadfast in the face of considerable risk opted to hand over their assets and withdraw from the country as international intervention in the conflict made no progress in bringing stability back to the country. In April 2015, French oil major Total, which was then the last remaining IOC in Yemen, halted its operations and withdrew all expatriate staff from its sites. Given the considerable investment that goes into oil and gas operations, the decision to withdraw from operations are not taken easily.
Field Security and PMCs
Private military contractors (PMCs) are often a go-to for IOCs in their efforts to protect personnel and assets operating among larger scale conflicts. Often made up of former military personnel, PMCs are employed to protect assets from threats such as non-state militias.
However, questions over the regulation and professionalism of PMCs due to frequent reports of reckless and extralegal behavior – though often not in operations directly linked to oilfield security – have tarnished their reputation.
Security contractor Blackwater, then contracted by the US State Department, was reportedly involved in over 195 shooting incidents in Iraq between 2005 and 2007. In one particular shooting incident on December 24, 2006, a security guard for Iraqi Vice President Adel Abdul-Mahdi was killed by an allegedly drunken Blackwater contractor, who was then flown out of the country and faced no charges.
The effect of such reports on both local and governmental attitudes was so great that in March 2012 the Iraqi government banned PMCs from acting as security for oilfields, offering the replacement of Iraq’s Oil Police, who, as stated in a memo from the South Oil Company, “will provide the necessary protection”. The decision has since been overturned, but the reputation of PMCs remains poor among Iraqis.
However, Chinese security subcontractors employed by China National Petroleum Corporation (CNPC) have been forced by the Iraqi government’s requirements for licenses and regulatory compliance, as well as the internal regulations of Chinese state-owned energy companies, to act more professionally than other PMCs employed in other regions.
Chinese PMCs in southern Iraq have more passive protocols than other such international firms in the area. For instance, Chinese PMCs, such as Ding Tai An Yuan, cooperate with armed Iraqi ones to protect personnel and infrastructure, as well as to introduce new standards, such as unmanned aerial vehicles and tethered blimps for scouting.
Crude Sensitivity
The security of oil and gas assets is a high priority for IOCs. From stifling small-scale local conflicts to understanding the dynamics of a given war, the IOC must conduct due diligence in not exacerbating tensions. Providing sufficient respect and support to local communities, as well as managing the behavior of PMCs, can be challenging tasks for IOCs to undertake, but ultimately necessary in both protecting its employees and its investment.
