As global energy supplies come under increasing attack by non-state actors and private energy holdings become key targets of political maneuverings and criminal activities, Oilprice.com discusses the nature of the growing threat and how to reverse the risk with "smart power."
To help us look at these issues we got together with corporate intelligence specialists Jellyfish Operations and security expert Jennifer Giroux.
Michael Bagley is the president of Jellyfish, a global boutique intelligence firm that combines on-the-ground intelligence collection and analytics with an unprecedented country-to-country economic diplomacy program that helps governments, corporations, institutions and private individuals forge secure partnerships, discover new opportunities and mitigate operational risks.
Jennifer Giroux is a global security expert who specializes in emerging threats to energy infrastructure in conflict-affected regions.
In the Interview Michael & Jennifer talk about the following (interview conducted by Jen Alic of OilPrice.com):
- Why the risk to global energy supplies is increasing
- Violent entrepreneurialism: Why piracy is on the rise
- The most immediate threats to global energy security
- Which countries are most likely to see attacks in the future
- Why Saudi Arabia could be the next country to have its energy infrastructure come under attack
- Why energy companies assets are becoming key targets.
- How energy companies can create opportunities in Conflict-Affected Regions
- Why companies need more than just intelligence to operate in hostile environments
OP: Energy supplies have always been at risk, particularly due to geopolitical maneuverings, transit through countries in conflict and those suffering from ongoing political instability, as well as piracy on the high seas. You have both mentioned that the risk to global energy supplies is increasing. How do you support that claim?
JG: There is a plethora of energy location and armed conflict data that shows a correlation between conflict or conflict prone regions and oil and gas producing and/or transit states, both onshore and offshore. While developing the Energy Infrastructure Attack Database (EIAD), we have seen a general rise in attacks on energy assets. In the last decade there has been an average of 327 reported attacks on energy infrastructure globally, and this figure is likely higher due to the fact that not all attacks are reported through open sources. Pooled together, the data reveals that not only are energy companies increasingly operating in risky, volatile environments and conflict zones, but their assets are becoming key targets for political and criminal reasons.
MB: More specifically, non-state actors from Mexico to Colombia, to Nigeria, Iraq, Pakistan and beyond are leveraging their terrain in dynamic ways. They are using energy infrastructure targeting as a tool to air political grievances in a calculated manner. For example, to garner illicit funds by stealing oil products and kidnapping energy sector employees, but also to generate global media attention that not only provides a springboard for groups to publicly challenge a state but also to inspire similar targeting behaviors in other regions.
JG: Another interesting insight from EIAD shows that while energy attacks are dispersed they tend to have a contagion or clustering effect in certain countries. In such cases, we find that energy infrastructure is targeted on a monthly, weekly, and at times daily basis - leading to broad disruptions that have national and international effects. This has been the case in Egypt's Sinai Peninsula, where natural gas infrastructure has been targeted on a monthly basis since February 2011 and disrupted energy supplies for Israel and Jordan. Yemen, too, has seen persistent attacks on the Marib-Ras Isa oil pipeline, for instance, that has led to a several-month shutdown that cost the country billions in revenue and shorted global supplies.
MB: While those cases represent politically motivated attacks, in Nigeria the oil theft and sabotage business has resulted in Shell declaring force majeure on Nigerian Bonny Light crude oil and shut down 60,000 barrels per day of oil. Offshore, energy carriers are being targeted throughout the Gulf of Guinea, making this the new maritime piracy hotspot. Overall, this is a highly complex issue that makes it increasingly difficult for energy companies to navigate and operate in such spaces.
OP: Geographically, what are the most immediate threats to global energy security?
JG: Of course with the effects of the Arab spring still percolating, the Middle East and North Africa region will continue to go through a tested and difficult time. With that, the urgent security consideration is Saudi Arabia as attacks or even threats to their installations have the most potential to disrupt supplies and the market. Though there have been some bright spots in Iraq's oil production, the country still have significant challenges that threaten stability on a near daily basis. I would not be surprised if we see another flashpoint of energy infrastructure attacks in this country.
MB: One can also not count on Libya to be a reliable production space given the turmoil and political transitions underway. Another region is Gulf of Guinea where international oil companies are incredibly important for production and exploration activities. Nigeria, and the Niger Delta in particular, produces light sweet crude that is incredibly important for the global market. No doubt that when these supplies are disrupted the market reflects that insecurity with price volatility.
OP: While most are aware of the rising incidence of piracy off the Somali coast and the threat to oil transit, how great is the threat now emanating from the Gulf of Guinea as an offshoot in part of the conflicts in Nigeria and unrest in Mali, for instance?
JG: Well, as it's been reported - maritime piracy is on the rise in the Gulf of Guinea. Furthermore, attacks in this region are not confined to the coastal region near Nigeria (where they have been historically) but are not spreading to the shores of Togo, Ghana, Cote d'Ivoire, etc. This reveals not only the security gaps in this region but also the violent entrepreneurialism that is spreading across the states. Offshore attacks in this year are executed by gangs that use brute force to attack ships, steal contents including petrol products, and then release the ship have a few days or weeks.
MB: Also, oil theft gangs are multi-national. For example, in a recent arrest of 27 people accused of stealing oil, 5 of them were Nigerians while the remainder were Ghanaians. The key take-away is that this is spreading and will thus become more complex and challenging to untangle the more sophisticated these oil theft gangs become. What's more is that we cannot forget the regional context - the high unemployment, growing illicit drug trade (transiting drugs from South America via Africa and onto markets in Europe), and weak governance issues. This makes it a high opportunity space for criminal groups to flourish and recruit.
(interview continues on next page...)