The suspected bombing of a Russian Metrojet airliner over the Sinai Peninsula has sparked concerns about Egypt’s security situation, but IOCs are showing little desire to pull out – despite warnings that the threat from insurgents could worsen.Anthony Skinner, a director at risk analysis consultancy Verisk Maplecroft, told Interfax the Sinai Province group – a branch of Islamic State that has claimed responsibility for the plane crash – may pose a considerable future threat to the oil and gas sector.
"[Sinai Province] may shift tack and increasingly look to target oil and gas interests across Egypt as it seeks to place the Egyptian economy under even greater pressure," he said. "The tourism sector has been wiped out following the [Metrojet crash] and other important sectors could increasingly be targeted," he added.
Skinner added that security risks for oil and gas companies in Egypt have increased under President Abdel Fattah el-Sisi because of the rise in attacks against the state and the economy. Just over half of all recorded insurgent attacks since November 2014 have been against government and state security personnel.
As well as continued assaults that have disrupted the Sinai pipeline, insurgents have also carried out a number of deadly attacks on individual IOC employees.
Sinai Province killed an employee of Apache in the Western Desert in December 2014, and kidnapped and killed a Croatian oil worker on the outskirts of Cairo in August 2015.
Cairo-based security analyst Zuri Linetsky said the shift to attacks on oil workers – so far the only industry targeted by Sinai Province – was a deliberate ploy to try to undermine investor confidence in Egypt.
Psychological warfare
"[Sinai Province] in Egypt has preferred to kill police and state officials to date," Linetsky told Interfax. "The killing of the two oil people was therefore […] a clear choice. It is a type of psychological tactic: hit the Egyptian government where it matters most – its wallet."
He said the threat of insurgency in the Western Desert in particular "may indeed be growing". Commercial operations in the region have been made less secure by the long, unsecured border with Libya, the considerable underground movement of arms and people, and an increasing number of Egyptian military operations.
Offsetting this risk is the fact that many of Egypt’s energy projects are now offshore, making them harder to reach. However, Egyptian media reported in December 2014 that the Egyptian navy had prevented an attack against offshore gas installations and Israeli vessels.
IOCs provide a large amount of foreign direct investment in Egypt. BP, Eni and BG Group alone account for over $22 billion in investment. The most recent data shows that, even in the early days of Egypt’s gas crisis in 2011, oil and gas revenues still made up 16% of GDP.
Optimistic view
Few of the IOCs contacted by Interfax would comment publicly on their individual view of the security situation in Egypt, but those that did were strongly positive about the country.
"We see that the security situation in Egypt has significantly and rapidly improved. We don’t comment on specific security issues, but we are following the situation in Egypt closely," Shell’s MENA spokesman Nureddin Wefati told Interfax.
A BP spokesman, although declining to comment on the company’s specific security arrangements, pointed to the company’s statement last week that it would accelerate the development of the North Damietta concession’s Atoll field as an indication of the company’s attitude towards Egypt.
The company’s Chief Executive Bob Dudley said the announcement was a "further demonstration of our continued confidence in Egypt". BP also said it would continue to invest in existing projects and further exploration.
Other companies, such as Dana Gas and Apache, have been quietly doubling down on their investments in Egypt since the country overhauled its tender system in 2013.
Despite what security analysts describe as a growing threat to IOCs, the positive tone is a distinct shift from two years ago.
Massive protests against the Muslim Brotherhood-led government in July 2013 caused BP to pull out 60 expatriate employees and BG to remove 100 workers. Eni and Shell also evacuated non-essential staff.
A previous exodus happened in 2011 during the January revolution, when BP, Statoil, Union Fenosa Gas, Shell and Russian companies Lukoil and Novatek withdrew their expat staff.
However, the opportunities available in Egypt today appear more lucrative. Over 60 concession agreements have been signed in the past two years, and IOCs are investing billions largely into offshore projects.
