In Amenas siege: Is Algeria's economy under threat?

A gas field near Zarzaitine, In Amenas, on 22 January 2013

Militant Islamists attacked the heart of the Algerian economy when they targeted the In Amenas gas plant in the Sahara desert earlier this month - an attack which for some rekindled grim memories of the civil war which ravaged the country in the 1990s.

The oil and gas sectors account for 70% of the national budget and the In Amenas plant accounts for 6-7% of Algeria's reserves of gas and condensate, and almost 3% of its oil reserves.

"[The militants' aim was] to destroy the Algerian economy, which depends on 98% of exports of hydrocarbons, and In Amenas is an important centre in this area," said Communications Minister Mohamed Said.

The attack came at a time when the government forecasts an increase in the production of hydrocarbons, which has been in decline since 2007 because of aging deposits.

In 2012, Algeria - which sees itself as a regional superpower - achieved a trade surplus of $27bn (£17bn), largely based on oil and gas, according to official statistics.

Repeated attacks on the sectors would have a devastating effect on the economy.

The industry was not targeted during the civil war which broke out in 1992 after the military annulled elections that the Islamic Salvation Front (FIS) was poised to win following a mass uprising - similar to the one that swept through Tunisia, Egypt and Libya more recently - against one-party socialist rule.

Latest numbers from Algeria

  • One Algerian and 37 foreign workers killed in the hostage crisis
  • Five foreigners still unaccounted for
  • 29 militants killed
  • Three hostage takers captured alive
  • Militants include 11 Tunisians, two Canadians, and nationals from Egypt, Algeria, Niger, Mauritania and Mali

At the time, northern Algeria was worst-affected by the conflict, with international airlines suspending flights to northern cities including the capital, Algiers, and the second city, Oran.

Instead, they flew directly to airports in the Algerian desert, which was then seen as more stable.

Failed security

This time, militants - operating under the banner of the Signed-in Blood Battalion, led by Mokhtar Belmokhtar - seized control of the In Amenas plant in the remote east, taking foreign workers hostage and killing them.

As the In Amenas site is within a military zone, it was always thought to be well protected by the army which had a strong surveillance team in the area.

Extra security forces had also been deployed along the borders with Mali, Niger, Libya, Tunisia and Mauritania, after France used Algerian airspace to launch a military offensive against the Islamist militants who had seized control of northern Mali last year.

Despite this, the attackers managed to enter the plant, killing dozens of workers, nearly all of them foreigners, before Algerian special forces regained control of the facility.

The government has now stepped up security even further around vital economic installations in the Sahara desert.

Pull-out unlikely

Despite the huge shock, the authorities here are confident that the Algerian economy will be able to weather the storm.

Start Quote

I do not think these companies can afford a permanent withdrawal after a significant investment corresponding to almost half of their investments in Algeria.”

End Quote Abdelmajid Attar Former Sonatrach boss

Some point out that most foreign companies stayed in Algeria throughout the civil war, which killed tens of thousands of people.

"The Algerian authorities have received assurances that firms and foreign employees will not leave Algeria," said Energy Minister Youcef Yousfi.

The In Amenas plant - a joint venture between state-owned oil firm Sonatrach, UK multinational BP and Norway's Statoil - has been operating since 2006 and has a production capacity of nine billion cubic meters per year.

"Proven reserves of hydrocarbons are estimated at 12.2 billion barrels of crude oil and 4.5 trillion cubic meters of natural gas," said Abdelhamid Zerguine, head of Sonatrach.

Former Sonatrach boss Abdelmajid Attar has told Algeria's Le Soir's newspaper that BP and Statoil - which evacuated their foreign staff after the siege - risked huge financial losses if they disinvested from In Amenas.

"I do not think these companies can afford a permanent withdrawal after a significant investment corresponding to almost half of their investments in Algeria," he said.

Most people are hoping that the In Amenas siege was a one-off attack - "collateral damage" from the conflict in northern Mali, following the French intervention - and not a signal that the Algerian side of the desert could become engulfed in conflict.

One thing is certain, though - after In Amenas, the Algerian government will strengthen its security apparatus in the Sahara, as beneath its sand lies much of Algeria's wealth.

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