New security system for Algeria oil bases

Last week’s return of foreign workers to the Tiguentourine gas facility at In Amenas is based on the implementation of new security measures at Algeria’s oil and gas fields and their various installations. The new measures are reported to cover the four regions: the In Salah-Adrar basin, Hassi R'Mel, Hassi Messaoud and the southeast area encompassing Tiafti and In Amenas.

Our understanding of the new measures is that some 80 oil installations have been linked together in a new early warning preventative warning system. This includes intensive monitoring operations over oil and gas fields by military aircraft, as well as an alarm control system operated by Sonatrach that is triggered in the event of the discovery of any infiltration into 50 and 100 km security perimeters surrounding oil fields and bases. The military presence in areas close to industrial centres, oil and gas fields, and bases that have foreign employees has also been strengthened.

In addition, considerable emphasis has been placed on recruitment, not only at the point of recruitment, but throughout the period of employment and after the departure of the employee. This is because the terrorist attackers at In Amenas are believed to have collected information from former employees at the base.

Other safety procedures will include establishing a national security database that will hold the identity and a detailed biography of all Algerian and foreign workers in the oil companies.

For more news and expert analysis about Algeria, please see Algeria Focus and Algeria Politics & Security.

© 2014 Menas Associates

Iran unveils contract model

The Ministry of Petroleum unveiled the draft model of its new oil and gas contracts, which is aimed at drawing more foreign companies to the Iranian hydrocarbon sector. The Iran Petroleum Contract (IPC) was announced in Tehran by Mehdi Hosseini, who heads a ministry-appointed committee to revise oil contracts.

‘In the new contracts, different stages of the petroleum industry (exploration, development, and production) are commissioned in an integrated manner,’ Hosseini told a forum organised to introduce the contracts.

The IPC is replacing buy-back contracts, which are no longer attractive to foreign companies. Under a buyback deal, the host government agrees to pay the contractor an agreed price for all volumes of hydrocarbons the contractor produces.

Under the IPC, the National Iranian Oil Company will form joint ventures in crude and gas production with international companies to manage projects, provide financing, and maximise hydrocarbon recovery, Hosseini said.

The official emphasised that the new contracts will offer higher fees for riskier exploration and production projects but that ‘ownership of reservoirs is not transferrable. Under new contracts, Iranian experts will work shoulder to shoulder with foreign investment companies in order to become familiar with the latest technologies of the world.’

The new contracts are also intended to raise the recovery factor of Iranian oil fields, half of which are in their maturity period. Iran needs US$150 billion of investments in its upstream oil and gas industry in the next five years, and the share of foreign investment in the contracts therefore had to increase.

Iran expects to attract US$100 billion in investment in its energy sector over the next four years after the new model takes effect.

For more news and expert analysis about Iran, please see Iran Strategic Focus.

© 2014 Menas Associates

Ghana: Gold operators under pressure

 

The on-the-ground impact of falling gold prices will be serious for Africa's gold producers according to South Africa's Gold Fields. Company officials, announcing a major restructuring, are prepared to close mines if doing so would increase profits, including the major mine at Damang in south-western Ghana that is 90% owned (through share ownership of "Abosso Goldfields Limited") by Gold Fields with the remaining stake held by the government. This is even if the Gold Fields mine at Tarkwa would remain financially viable even assuming continued low gold prices of not much more than US$1,300 per ounce. It should be noted that Gold Fields, citing low gold prices and high operating costs, last week announced the slimming down of its board of directors from twelve members to nine.

By contrast, another major international gold operator in Ghana – the US' Newmont - emphasized last week at the Public Accounts Committee's public hearings that it remains "committed to Ghana for the long-term" and that it had kept around 80% of its Ghana gold sales earnings in Ghana during 2012. However, digging beneath this official picture of its Ghana operations, PAC members complained that "up to 100%" of earnings of gold companies could be held offshore under a rumoured in-progress "retention" agreement between Newmont and the government.

 

Under Ghana's current minerals and mining laws - particularly the 2006 Minerals and Mining Act which provides incentives to mining companies - retention account agreements signed by the relevant mining company, the Finance Ministry, and the Bank of Ghana, can allow greater offshore retention of earnings.

 

Given Newmont's emphasis on domestic earnings retention, and the spotlight being turned on natural resource companies, including IOCs operating in Ghana, such a scenario seems extremely unlikely, and likely reflecting concerns of domestic observers over what current mining laws could potentially allow. More information should be forthcoming from PAC proceedings, focusing on the Auditor General's 2012 report, in the coming weeks.

 

For more news and expert analysis about Ghana, please see Ghana Politics & Security.

 

© 2013 Menas Associates