Posted: Wednesday 23rd January 2013 at 0:00 am

Algeria’s hostage saga: The dilemma for Trans-Saharan gas pipeline scheme

667bAlgeria plant Algeria’s hostage saga: The dilemma for Trans Saharan gas pipeline schemeWITH the recent hostage debacle in Algeria, which killed 39 hostages, international energy companies operating in the region are left grappling with the integrity of security situation in the terrain, where Nigeria is investing billions of dollars on the 4,000 kilometres of gas pipeline.

Nigeria is promoting the Trans-Saharan gas pipeline, (also known as NIGAL pipeline and Trans-African gas pipeline), in collaboration with Algeria and Niger Republic.

The project involves the running of gas pipelines from Calabar to Niger Republic into Algeria and onward to Spain. It is estimated to cost $12 billion (N1.9 trillion) and would supply up to 30 billion cubic meters of natural gas yearly to Europe.

The assumption that energy installations in the Sahara region were safe from terror attacks collapsed last week, when armed militants invaded the living quarters of Algeria’s Ain Anemas gas facility in the remote south-eastern part of the country, seizing hundreds of hostages, both local and foreigners.

Among them are American, British, Japanese, French and Norwegian oil workers. The impact of that attack, for which Algerian rebel commander Mokhtar Belmokhtar claimed responsibility, will likely be felt for years.

Meanwhile, the Nigerian government had just earmarked $400 million in this year’s budget to fast-track the Tran-Saharan Gas Project, expected to foster and transform the economy of African countries and impact on the lives of the citizens.

However, the most significant obstacle to this massive project is the issue of security in the countries through which the pipeline will run. Nigeria, Niger and Algeria are among the least secured areas because of the various terrorist movements that destabilise them. Security risk, along with the speculative nature of this project, means that even a small-scale attack could seriously impair or delay the completion of the pipeline, dramatically raising costs for the companies involved.

Some concerned Nigerians are already becoming skeptic about the smooth implementation of the project, giving the scenario, which led to the death of many people in that region last week.

The immediate past President, Nigerian Association of Petroleum Explorationist (NAPE), Mayowa Afe, said the security concerns might hinder the progress of the project, if necessary actions were not taken to secure the terrain.

He expressed dissatisfaction over the lack of security in some African countries, including Algeria, Nigeria and Mali, where he said lots of projects were in Jeopardy.

“There are security lapses in many African nations now. So many projects are being affected, while a lot of manipulations and sabotage are on-going, but people only know when the deed has been done. So, Nigeria needs to ensure that the agreement guarantees safety of the project,” he said.

Afe, who is also the managing director of Danvic Concept, urged the Federal Government to strategically involve the communities along the line in its implementation stage, adding that the Algerian government should also be committed to guarantee the safety of personnel.

The President, International Society For Energy and Environmental Development, Akisola Cole was optimistic about the project, noting that the nation and other beneficiaries should put resources together to protect the multi-billion dollar gas project.

According to him, the hostage saga might heighten the security concerns in the country, but it is not likely to affect the project, if proper security strategies are put in place.

“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,” he said.

Cole added, “For Nigeria to have the ambition of such gas pipeline supplying product to Europe make economic sense than Train projects, so I hope it would make good impact on economic base of the beneficiary countries.”

The TSGP will be the world’s longest pipeline, much of the construction will take place in one of world’s most difficult environments, the Sahara desert, significantly raising costs.

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 has fronted up with any money.

The European Union supports the programme and considers the building of the pipeline crucial to the diversification of its energy resources. The pipeline would enable European countries to tap directly into Nigeria’s five trillion cubic meters of natural gas and reduce its reliance on Russia and Algeria (although Algeria’s Sonatrach and, potentially, Russia’s Gazprom will also be involved in the TSGP project).

The NNPC, which promotes the project on behalf of Nigerian government, had said, “we will build a trans-Nigeria anyway and we will build it with a view to continue trans-Sahara if the market supports it.”

NNPC expects it will take few months to be sure its financing assumptions are correct and is working with the West African nation’s Electricity Regulatory Commission.

It stated, “we want to be sure that they can afford it and if they cannot then we need to go back to government,” he said. “Once we’re done with that and we can put a bankable template we think getting investors won’t be difficult.”

“We’re expecting gas to completely decouple from oil in terms of investment, so right now we are having a lot of new players, who are not like the majors,” he said.

“The majors are more oil-centric and they’ve not had the kind of attention to gas. Now we’ve having people whose assets are more dominated by gas assets and as such are more willing to take it.”

The corporation had described the Trans-Sahara Gas Pipeline Project as a veritable vehicle for strengthening the bilateral economic relations between Nigeria, Algeria and Niger Republic.

Meanwhile, there is skepticism that the biggest impact of the hostage debacle would be on Algeria, which relies on energy production for 95 per cent of its exports and more than 60 per cent of its total revenues.

The Ain Anemas gas plant, a joint venture with BP and Norway’s Statoil, accounts for more than 10 per cent of the country’s natural gas output. Foreign companies began evacuating their staff from Algeria immediately after the kidnappings.

There is no knowing when oil companies will deem it safe to return expatriate staff to Algeria, let alone risk plowing billions into new energy projects, Algeria has been courting Western investment, not only in its hydrocarbon sector but also to finance such renewable-energy plans as solar plants in the vast Algerian Sahara. At minimum, potential investors will now drive a harder bargain, given the additional expenses they would have to incur on security in order to expand their infrastructure in Algeria.

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