Planning offsets inherent risk in developing countries

Selecting a benign location in which to operate is not a luxury available to the oil industry. Other industries can factor in labor costs or the regulatory environ-ment when deciding the location of overseas operations, but oil companies cannot choose where oil reserves lie.

Th 100260

Kevin Keable,Control Risks Group

Selecting a benign location in which to operate is not a luxury available to the oil industry. Other industries can factor in labor costs or the regulatory environ-ment when deciding the location of overseas operations, but oil companies cannot choose where oil reserves lie. This inevitably leads them into areas of the world where security becomes one of the industry's most critical considerations.

The oil industry unfortunately has a history of creating security problems in developing countries as companies struggle to contend with existing security concerns. Even where oil companies have made genuine, high-profile initiatives to create local benefits, there are often factions within those communities that prefer conflict to cooperation. The industry has a unique risk profile that must be counterbalanced by proactive and carefully designed security plans.

Careful planning essential

A look at one of the giants of the industry shows the degree of security risk exposure that the major players must manage globally. In 2000, Shell was operating in 10 countries facing war or major civil unrest, employees were kidnapped in four countries, staff were evacuated from four countries, and the company suffered what it termed "severe security incidents" in 18 countries, according to Shell Report 2001.

Th 100260
This map shows the risk level for conducting oil and gas activities in a portion of West Africa.
Click here to enlarge image

Shell and other operators know security plans are implemented to reduce physical risk to personnel and assets, but also provide important protection against legal liabilities and reputation risks in an era where corporate accountability and best practice are central tenets of business.

The severity and types of security risk vary widely. In Nigeria, for example, volatile community relations exacerbate already high security risks. Violent crime is endemic. The various ethnic minorities in the Niger Delta region have many grievances that serve as pretexts for local attacks on oil companies. Youths use oil spills as an excuse to seize oil flow stations, oil equipment, and barges, releasing equipment once compensation has been paid.

Hostage-taking for ransom or "compensation" is another danger for foreign oil workers. Although most victims are released unharmed, kidnappings are often effected by militants armed with machetes, shotguns, or in some cases, automatic weapons. In remote areas, youths attack large targets such as barges, boats, helicopters, and even rigs. Failure to respect the demands of kidnappers, whether demands are met, can lead to increased incidences of kidnappings, violent attacks on staff, seizure or sabotage of facilities, theft, obstructive behavior, strikes, protests, violent unrest, or worse. August 2000 marked one of the most serious incidents in recent years, when activists took 165 people hostage at two oil installations.

Causes of security risks

The root causes of security risks are often far from straightforward. They can be economically or politically driven, or they can be rooted in complex tribal issues that foreign companies find difficult to grasp. Recently in Pakistan, a Chinese contractor working for a Western oil company was killed and three local workers injured when gunmen opened fire on them. The incident was almost certainly provoked by an inadvertent breach of protocol with powerful local tribal leaders, who on the instruction of the district administration, were omitted from negotiations about surveying in the area.

In West Africa, a high proportion of security-related incidents stem from local labor disputes and poor or inadequate labor relations. These affect contractors as well as major operators. Evidently, it is vital to ensure that contractors are fully compliant with the client's security, community relations, and labor relations requirements.

Assessment, awareness, training

The diverse nature of the security risks facing oil companies means that there is no universal security plan. The challenge is to develop a plan that corresponds as closely as possible to threats in a given environment. The first stage of any security plan must be to conduct a threat analysis designed to identify who or what the main threats are and how they are likely to manifest themselves.

Establishing physical defenses doesn't necessarily play a central role in security planning. The key to effective security planning is training in-country staff and contractors in security awareness and appropriate threat response. The best security plan is "compliant" with local culture, stresses the need to liaise with appropriate branches of the police and military, and conforms to the local rule of law.

The plan might also contain proactive elements designed to neutralize threats at their source. A community relations program might reduce the likelihood of aggression against oil workers, or a public relations initiative could produce the same result. A plan might simply require the company to advertise its security policy as a deterrent to would-be criminals or terrorists.

Spotlight on Nigeria

The benefits of a well-conceived security plan can be measured in human and financial terms. Not only does it protect employees, it ensures that operations can resume expediently following an incident. Two case studies from Nigeria illustrate the benefits of such a plan. In the first case, the local community called in a security consultant when an oil company suffered a suspicious breach in one of its pipelines that caused widespread contamination and claims for compensation.

A consultant was deployed to liaise between the client and the forensic scientists investigating the cause of the breach to ensure that they could carry out their investigation safely and effectively. The situation was volatile. The local community claimed the oil company was at fault, and there were concerns that the scientific investigations would be impeded. The consultant successfully managed security for the two scientists, who were able to collect samples and carry out a thorough investigation. Investigation results revealed pipeline sabotage. Relevant security measures were implemented in an effort to prevent the situation from recurring, and the company was spared the cost of compensation payments.

In the second case, an oil company was forced to halt production after tribal militants invaded its facilities. A security consultant investigation revealed that the company in question had no security plan and had made no attempt to adopt a pro-active community relations program.

A trained crisis response consultant who helped secure the release of the hostages resolved the immediate crisis. The security consultancy then devised a plan to prevent similar security incidents. The process began with a comprehensive threat analysis and a detailed survey of the site. The next stage involved drafting contingency plans, offering advice on fostering better community relations, and establishing counter-corruption strategies. Since these services and measures were implemented, production at the facility has continued unimpeded.

However carefully the industry treads, it must be more conscious than other sectors about security. Any oil company entering a new market or expanding within an existing market in the developing world should give top priority to security planning. A comprehensive understanding of the local environment, underpinned by rigorously enforced security measures, is critical to mitigating security risks.

Personal security arrangements vary widely by region. Standard management guidelines for improving security effectiveness include:

  • Monitoring the local security situation, making sure to jointly assess potentially hazardous scenarios with personnel, clients, and contractors
  • Implementing a coordinated response, including emergency and evacuation plans, to security-related incidents for personnel
  • Communicating to staff all security incident reports immediately
  • Maintaining reliable telephone and radio communications between personnel working abroad and company headquarters.

Author

Kevin Keable is business development consultant for Control Risks Group, an international political and business risk consultancy with headquarters in London. He is responsible for promoting CRG's security and reporting services to the UK energy industry. Keable is a member of the UK Institute of Directors and the Society of Petroleum Engineers. He is available at kevin.keable@control-risks.com, tel: +44 (0) 1603 813940.

More in Company News