Tag Archives: Tunisia

North African Energy Targeted by Labor Concerns

746884-aus-bus-pix-libya-refineryAfter nearly two years of widespread political and social transitions across North Africa, protest and labor movements have continued to expand in hopes of making the most of the new political environment. While motivations may vary, these groups are increasingly targeting the region’s energy sector in Libya, Tunisia and Algeria, commonly aiming their ire at foreign firms and their local subsidiaries.

Against a backdrop of regional unrest, these energy-aimed efforts are to continuing to increase and beginning to threaten what many feel is North Africa’s quickest and surest route to recovery and post-Arab Spring stability.

In many cases, protests and labor strikes have taken issue with what is felt to be a lack of common benefit from the region’s rich oil and gas production. From Tunis to Benghazi, this has centered on the complaint that far too little of the region’s oil and gas wealth and revenue is reaching local communities.

A Post Arab Spring Analysis

In Tunisia, critics have taken issue with what they feel is a lack of work opportunities for local workers offered by the country’s most prominent energy outfit, BG and their local subsidiary BG Tunisia. Facing a 17.6 percent post-revolution unemployment rate, Tunisia has been unable to keep up with and absorb the growth in increasingly skilled young workers, according to a World Bank report.

Facing a similar demand for more work opportunities, but without the spike in skilled labor, Libya has seen protest movements target oil and gas facilities across the country, including a December strike at one of the country’s busiest oil and gas ports, Ras Lanuf. Protestors began the New Year with a strike at the Zueitina oil terminal, situated just east of Tripoli. According to the country’s Oil and Gas Minister, Abdul Bari Laroussi, the shutdown has come with a demand to employ 1,500 local residents and cost the country an estimated $1 million a day in lost revenue.

Additionally, Libya has seen protest groups use energy facilities to voice concerns about a variety of issues, most notably political representation. Shortly before the country’s first post-revolution election, armed militias occupied refineries in El-Sider, Ras Lanuf and Brega, shutting down half of the country’s export capacity. Their actions were aimed at increasing the number of seats reserved for the country’s oil-rich eastern provinces and shifting more authority over energy issues to the city of Benghazi.

Despite having largely escaped the kind of public protests that led to political transitions across the region, Algeria has faced its own share of protests aimed at the incredibly valuable oil and gas sector. Even before the Arab Spring protests began, Algeria faced a pushback from the country’s large number of unemployed for what they felt to be a lack of opportunities for local workers. Undoubtedly the country’s largest economic force, Algeria’s oil and gas production accounts for 98 percent of their export revenue and a large percentage of government funding. State efforts to curb these protests through increasing government incentives spending and a tighter security environment have worked in the short term. However, protests have continued to flare up as resentment builds around a lack of benefits seen across the country as well as wider uncertainty about what will follow the expected retirement of President Abdelaziz Bouteflika before scheduled elections in 2014.

According to a Bloomberg report, dwindling oil reserves and uncertainty have made the country’s relative calm difficult to sustain.

“Pacification through finance can’t go on forever,” Azzedine Layachi, a professor of international and Middle East affairs at St. John’s University in New York and Rome, told Bloomberg. “Everything is in shutdown mode until 2014 and that’s when we’ll see what direction Algeria takes.”

An Uncertain Landscape for Foreign Investors

In all three national cases, further labor unrest and protests aimed at energy sector actors could have a significant effect on the ability to attract much-needed investment and interest from foreign firms. In Libya, this means the ability to promote the full return of companies that halted operations in the midst of the civil violence that brought down the government of Muammar Gadaffi and move beyond pre-conflict levels to ensure future growth. While Tunisia is putting less emphasis on energy reserves as a means of economic recovery, continuing unrest does threaten to put off further investment from companies like BG, which provides over half of the country’s natural gas demand.

Last year, sit-ins at processing plants spurred talks between the company and local leaders, concluding in pledges for greater attention to local hires, including training options. Recently the company has said that while they would not consider leaving the county as a result of the sit-ins, they did not see themselves in a wider labor role.

“We continue to work in Tunisia and to explore new opportunities. Although the phenomenon of sit-ins and strikes is annoying, the group will not leave the country for all that,” Sami Iskander, Executive Vice-President and Managing Director of BG, Africa, Middle East and Asia told the Tunisian News Agency, but added, “the main purpose of the group is the production and supply of gas in the country and not creating jobs.”

Currently BG provides about 60 percent of Tunisia’s natural gas demand and employs about 1,000 employees.

Finally, further unrest in Algeria could prove troubling to the government’s recent push towards introducing unconventional shale exploration efforts to the country. Boasting significant domestic potential, Algeria will have to first deal with significant foundational investments associated with the shale excavation process in terms of both machinery and technical expertise. To help cope with these early expenses, the national government and the state-backed Sonatrach have unveiled new revenue sharing agreements and taxing schemes aimed at appealing to foreign investors with shale experience. Already known as a risky investment in the region, Algeria could prove even more uninviting if protests and strikes continue to expand.

So far, these protests have elicited little more from state officials than targeted actions according to each, specific case. However, according to the Agence France-Presse, Libya’s Prime Minister Ali Zeidan has threatened to impose “order by force” in to address those actions that threaten the country’s energy sector.

“Oil is our only source of revenue,” he said, according to the AFP report. “We will not allow any (armed) force to confront the people and threaten national security. I warn families, tribes and regions that we will take decisive measures.”

While Tripoli’s hard line may prove effective in garnering local support, it is far less clear whether it will provide the sense of stability needed for foreign firms to return to the region.

Image: The Australian

Originally Posted in Newsbase’s AfrOil Monitor

 

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Qatar Lays Downstream Foundation in North Africa

As investors and development teams from Europe and the United States keep their cautious distance from the uncertainty of North Africa after the Arab Spring, some financial support and confidence is arriving on the Mediterranean shores, perhaps none more substantial than that of Qatar.

Active and present from early on in the rapidly changing capitals of Cairo and Tunis, Qatari representatives have stepped up their support in recent weeks, signaling a willingness to contribute, including downstream efforts that could prove vital to the region’s recovery and future growth.

Eager to strengthen ties in the region, especially in those states that have seen a shift in political leadership over the past year, Qatar began outlining a series of financial programs earlier this year. In Tunisia, a dormant refinery project was revived in May after Qatar announced that they would again put forth the $2 billion necessary to support a refinery project that could see the country’s output capacity increase fourfold. Boasting an initial output of 120,000 bpd, the plant will eventually produce 250,000 bpd upon completion, as well as 1,200 jobs. By aiding in a post-Tunisia’s efforts to reduce heavy dependence on foreign energy resources and even move them towards a possible role as refined product exports, Qatar is hoping to sew the seeds of good will with the post-Ben Ali government.

In addition to cultivating a relationship with the new government in Libya, Qatar has also worked to help the development of downstream energy projects in a post-revolution Egypt. Earlier this year, Qatar announced a $3.7 billion financing agreement with the Egyptian Refining Company to help support a refining project there, with the Qatar Petroleum set to take on a 25.3 percent stake in the effort, according to a Bloomberg report. Shortly after, the Qatar Investment authority announced a sprawling $18 billion investment plan, with $8 billion set aside for electricity and natural gas projects to the East of the Suez Canal.

The expansion of a North African footprint comes as Qatar has extended its reach into the energy sector, including several recent purchases and expansions of stakes in energy companies across North Africa and Europe. The new funding agreements also challenge the tide of recent state and private investors who have acted with caution when dealing with North African nations.

Image: North Africa United

Originally Posted in Newsbase’s Downstream MENA Issue

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Italy’s Pipeline Hopes Dashed by Algeria

After finally winning the support of hesitant Italian authorities, the Galsi pipeline appeared to have been given a new chance at completion with leaders in Rome looked to diversify their vital energy imports. However, opposition is now emerging from the Algerian side of the project, with national officials warning that costs and technical challenges could delay or even halt the transport effort.

Dependent on imports for 90 percent of their natural gas needs, Italy set their sights on broadening their roster of production partners following last year’s political unrest in Tunisia and Libya. Violence and instability in both countries during 2011 led to delays or halts in production and output, threatening to cut Italy’s energy supplies. Libya’s civil war forced an evacuation of the staffs of most foreign firms leading to production shutdowns while Tunisia’s political protests led to a short closure of the pipeline used to ship Algerian natural gas to Italian shores, amounting to 35 percent of the country’s demand.

Eager to avoid such uncertainty again, Italian officials began voicing their support for the completion of the Galsi pipeline, linking Algerian fields with the island of Sardinia and the Italian marketplace. The result of an MOU signed in 2007, bringing to together the interests of Algeria’s state-backed Sonatrach, Euro energy firms Edison, Enel and Hera, the 900km pipeline would mark the second such project linking the North African nation with Italy, via a landing in Sardinia. However, unlike the Trans Mediterranean pipeline, the Galsi would carry an estimated 8 billion cubic meters of gas northwards upon completion directly from country to country, skipping a passage through Tunisia.

In October, Italian political leaders issued an appeal to Algeria to approve and move forward with the pipeline project with haste, allowing for Italian companies to pursue natural gas projects in the country with the assurance that transport lines will be available to them. However, resistance to the project has now begun to emerge in Algeria, with Energy and Mines Minister Youcef Yousfi casting doubt on the viability of the transport line in the near future.

“With regard to the Galsi project, the partners are waiting for technical and economic conditions to be present and also to obtain administrative authorization in Italy to go ahead with the project,” he told a local newspaper, according to Reuters.

Image: Eni

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Tunisia Pushes for Larger Role in MENA Recovery

Eager to be an active participant in North Africa’s economic recovery following the political transitions of 2011, Tunisia has pushed for greater partnerships with Libya and Algeria, including the region’s vital energy sector. With domestic reserves that are meager in comparison to its neighbors, Tunisia has set out to rebuild confidence in its transport and refining capabilities and ensure cooperation in bringing the area’s vast reserves to European and Asian markets.

One such effort is the revival of the Skhria refinery project, which had previously been abandoned along with a related pipeline project due to political and economic pressures, according to African Manager.

Restoring confidence among international investors and regional partners will be vital to attracting needed funds for infrastructure efforts as well as erasing lingering concerns about political instability. In the case of Algeria, these concerns have led leaders in both Algiers and Rome to explore the potential of alternative pipeline projects after the ability for Tunisian-hosted transport lines to remain operational came into question during the country’s political conflict. The result has been renewed attention to the long-delayed Galsi pipeline effort, which would allow for the delivery of Algerian natural gas directly from North Africa to the European market by way of Sardinia, skipping Tunisia all together. Although Tunisia was largely able to escape the level of violence that led to a complete shutdown of production and output in neighboring Libya, their hydrocarbon operations were impacted by direct attacks, including one on a pipeline outside of the city of Zaghouan in July of last year

In the case of Libya, Tunisia likely stands to have better luck in the energy sector as representatives of the transitional government in Benghazi have already stated that they will giver preferential treatment to Tunis for business opportunities in thanks for their support during the conflict.

Tunisia’s efforts reflect a broader, regional push towards greater economic and political cooperation among Maghreb states, as evidenced by recent statements from heads of state from across the Southern Mediterranean.

“I firmly believe that there is no future for Tunisia in Tunisia, and so is the case for Algeria, Libya, Morocco and Mauritania. Our future lies in the Maghreb entity,” Tunisian President Moncef Marzouki told the El Khabar newspaper on January 15. Tunisian leaders have pledged to host a gathering of regional leaders to help move this process forward in the near future.

Image: Aramco

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Shale, Energy and North Africa’s Future

As countries across North Africa work towards rebuilding both customer confidence and hydrocarbon operations following the political and financial instability of 2011, some are looking past traditional options to test the limits of the region’s shale potential.

First initiated in Tunisia in the Spring of 2010, North Africa’s shale efforts have slowly spread across the region, adopted by both established oil and gas producers and those who see little potential for traditional measures. The push towards exploring the area’s deep-set shale reserves came as the success of such efforts in the United States and studies showing widespread potential across the globe began to spur investor excitement. As time allowed closer inspection of the geological variances of the Maghreb states and their true shale potential, a clearer picture of what shale deposits could mean for the region has emerged.

These efforts come just as similar efforts in more mature shale markets are running into often debilitating challenges. Building on environmental worries related to the practice of fracking, public and political movements have successfully stalled efforts in the United Kingdom, France and parts of Germany as the uncertainty about the effects of the practice have added to concerns about project costs. This environment led European Union Energy Chief Gunther Ottenger to suggest the possibility of a community–wide regulatory system on shale efforts, inviting a pledge to veto any such legislation from Poland’s government, who has led the way towards introducing shale projects to the European marketplace. Meanwhile, in the birthplace of the fracking process, US President Barack Obama accompanied his support for further shale projects with an appeal for energy companies to disclose the ingredients of fracturing fluids, which have been protected information until now. However, these worries and protest movements have done little to damper enthusiasm among North African actors, as they continue to move shale projects forward.

Building on the region’s first shale effort in March 2010, Tunisia are continuing to work with early partners France’s Perenco and Canada’s Cygam in their exploration efforts, though last year’s political transition slowed the effort’s momentum. While both firms have worked to assure their Tunisian partners of their intent to stay put, lingering questions of instability, including the recent kidnapping of a mayor near the vital Ghadames Basin do little to help calm project partners.

Hailed as the country with the most shale potential thanks to the accessibility and quantity of reserves in the Ghadames Basin it shares with Tunisia and the Illizi Basin, Algeria has moved to attract foreign partners for shale efforts. According to Reuters, estimates suggest up to 1,000 trillion cubic feet of natural gas, trapped in shale rock about 1000 meters beneath the ground.  Facing a steady decline in the production levels of more mature oil and gas options, Algeria’s actions suggest a long-term approach to energy alternatives that included a heavy dependence on non-traditional resources such as shale.

Algeria and their state-backed firm Sonatrach have worked to secure working partnerships to help move their shale efforts forward, beginning with the signing of a MOU with Italy’s Eni last year. The Spanish giant has also looked to expand their resource base after Libya’s production all but halted amid political violence last year. Eni’s MOU with Sonatrach is meant to both lend the company’s shale extraction expertise to Algeria and help the company ensure a more dependable natural gas source for export-heavy Italy. After investing billions in hopes of solidifying Libya as a consistent source of oil and gas for the domestically barren Italy, the country lost nearly a third of their energy imports as political protests turned into violent conflict earlier this year. While Eni stands as Algeria’s largest shale partner, Sonatrach have announced that they will continue seeking shale partnerships with other international firms.

Even in Morocco, where domestic energy resources have remained elusive to the leadership of King Mohammad VI, one company has bet that the company’s true potential lies far deeper. Following four years of testing and coming in the latter half of a 3 year Memorandum of Understanding with the government of Morocco, London-based San Leon announced this month that they were ready to begin production at a site in the southern part of the country. Hoping to replicate their efforts in Poland, San Leon entered the northwest African nation five years ago to begin initial testing in the Tarfaya Oil Shale Field Pilot Project. San Leon recently announced that they had achieved “connectivity” between two wells in their Tarfaya oil shale project, suggesting progress in the country, though the Irish firm’s pace has worried some as their share price shrunk 59 percent over the last year. Despite overlapping basins deemed positive, Libya is the only country in the region to receive little attention by shale actors, as alternative efforts have been overshadowed by the substantial promise of traditional energy projects.

The Obstacles that Remain

For all the interest in the region’s predicted shale potential, a number of obstacles towards profitable operations remain, which have undoubtedly increased with the political instability of the last year. In addition to countries now faced with re-building confidence among foreign investors following the ousting of long-standing governments in 2011, many face significant funding deficits needed to support the high infrastructure costs associated with shale efforts. Largely lacking the access to the equipment, technology and personnel needed to reach and exploit shale projects, North African states will need the support of international partners to move these projects forward. In addition to signing cooperation agreements with firms from across Europe, some states are looking to the US State Department’s Global Shale Gas Initiative for guidance and aid, though political divisions and uncertainty about regional stability have kept that support

Image: Arabian Oil and Gas

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Aftershocks of the Revolution Pt. 2: LGBT Human Rights and Foreign Aid to MENA States

After coming across a Christian Science Monitor map displaying the treatment of LGBT citizens in each country in Africa earlier this week, I thought back to the speech recently delivered by U.S. Sec. of State Hillary Clinton. Delivered at the Palais des Nations, Geneva, Switzerland, the speech called for greater support for the human rights of LGBT citizens across the world and, in so many words, making it clear that State Department personnel would be advised to consider treatment of LGBT populations when making decisions about foreign support, including foreign aid. The message seemed clear – countries that tolerated or supported the abuse or lack of equal rights for LGBT citizens would run the risk of aid reviews and/or cancellations.

While we are still some time away from seeing just how the US State Department will follow up on Clinton’s speech, its worth exploring how closer attention to LGBT rights could impact much needed aid packages to countries emerging from the Arab Spring. This is especially relevant in countries that have seen more conservative parties make significant strides during recent elections, such as Egypt, Morocco and Tunisia. According the CSM summary, all countries in North Africa have policies of imprisonment from one to ten months for LGBT citizens. Further, every one of those countries receives some level of foreign aid from the United States, led by Egypt with $1.5 billion in support as of last year. According to the US government releases, Egypt is followed by Morocco with $43.6 m, Tunisia with $6.5 million, Algeria with $2.8 million and Libya with $1.6 million though that is likely to change after the country holds planned elections in the Spring.

There is little reason to believe that the US will base all or any of their attention on LGBT rights when making final aid decisions over the coming months given the weight of other factors in the region, including security and political stability. Furthermore, it may not even be advisable at this point to interfere in how foreign aid is spent at all so early in the process of building new governments, according to regional observers.

“The best thing is probably to just give the money to the governments and then encourage them to use it in ways that make sense and monitor it,” Frank Anderson, president of the Middle East Policy Council, told the International Business Times.”History has shown that there’s great sloppiness and opportunity for corruption when you give governments money, but attempting to manage the system ourselves has failed miserably in place after place after place.”

Still, given the timing of Clinton’s speech, it is worth being aware of the elevated status of the issue as countries across the region struggle to find a new political and social balance and what, if any, role does the State Department intend to play in that process.

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