VULNERABILITY OF KEY FOREIGN OIL SUPPLIERS

S E C R E T SECTION 01 OF 02 ALGIERS 002091

SIPDIS

E.O. 12958: DECL: 10/04/2015
TAGS: KHLS EPET ETRD EWWT PTER PINR ASEC
SUBJECT: VULNERABILITY OF KEY FOREIGN OIL SUPPLIERS

REF: A. SECSTATE 182688

B. ALGIERS 2055

Classified By: CDA Marc J. Sievers for reasons 1.4 (d),(e),and (g).


1. (S) Post provides the following answers to the
Department's questions on the vulnerability of key foreign
oil supplies in Algeria:

(S) -- Have host governments completed vulnerability
assessments of the facilities (Arzew Terminal and Skikda)?

Following the 2004 explosion at Skikda (see para 2),the GOA
undertook a comprehensive audit of all port facilities,
especially relating to hydrocarbon and industrial security.
The Ministry of Energy oversees quarterly checks on all
installations. Algeria submitted its port facility security
plan (PFSP) on June 6, 2004 to the International Maritime
Organization (IMO). The PFSP covered all major oil exporting
port facilities. Algeria's Port Security Officer is the
Minister in charge of Ports, Mohamed Mhareb. While the PFSP
should provide for all contingencies in the event of an
emergency, including a terrorist attack, a trusted industry
source told EconOff that, to the best of his knowledge, a
professional vulnerability or risk assessment of either
facility for counter terrorism purposes had never been
completed.

(S) -- What actions have they taken to reinforce protection
and harden vulnerable infrastructure to prevent terrorist
attacks or other disruptions?

Algeria has vast experience of internal terrorism dating to
the 1990's, but over a decade of terrorist operations,
including bombings, Algeria's "golden goose" i.e. the
hydrocarbon sector has never been struck. All facilities in
country have either a military platoon or gendarmarie (local
police forces) assigned to them. This constitutes a
protection force of 30 to 100 people per facility, in
addition to a surrounding fence topped with razor wire and,
in most instances, closed circuit TV surveillance equipment.
In the south, the petroleum facilities are in the middle of
the desert so a "sneak attack" would be highly unlikely if
not impossible. Facility security is therefore able to see
anyone coming well in advance. Despite the aforementioned
security measures, industry experts indicated to EconOff that
"Skikda and Arzew would be easy targets for an external
threat," though post believes no internal terrorist
organization has the capability to mount a successful attack
on these facilities.

(S) -- What would be the impact if one of these facilities
reduced or halted its output?

Algeria currently produces 1.8 million barrels of crude
daily, of which it exports a total of 1.4 million barrels per
day (BPD). Skikda handles roughly 40% of Algeria's exports
at 520,000 BPD; Arzew is the second largest crude export
terminal at 470,000 BPD; Bejaia accounts for 370,000 BPD; and
the port of Algiers ships 77,000 BPD. Algeria expects to
increase its total crude exports to 1.5 million BPD by the
end of 2006. The Skikda refinery refines 350,000 BPD and
Arzew refines roughly 400,000 BPD. Refined fuels are mostly
used for internal consumption, but a small amount is exported
to Western Europe. Arzew is also the main terminal/export
point for Algeria's liquefied natural gas. Algeria currently
produces 2.8 trillion cubic feet of natural gas yearly and is
the third largest source of U.S. natural gas imports at over
120 billion cubic feet per year. U.S. petroleum company
Honeywell estimates that Algeria has the potential to
increase crude oil production capacity to 2 million BPD and
natural gas production to 4.0 trillion cubic feet per year by

2010.

(S) -- Are there any other facilities which are particularly
vulnerable?

The Hassi Messaoud area is the heart of Algeria's hydrocarbon
extraction and production. As noted, most of the facilities
in that region are in the middle of the desert, but a
successful attack on Hassi Messaoud would severely disrupt
nearly all of Algeria's oil export capacity. One of
Algeria's pipelines terminates at the La Skhirra terminal on
the coast of Tunisia. The Tunisian authorities maintain
security measures at that facility.

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DOUBTS ABOUT SKIKDA SAFETY
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2. (SBU) A large, accidental fire broke out October 4 at the
Skikda refinery when a crude storage tank was apparently set
ablaze by an electrical spark (Ref b). Though firefighters
were eventually able to contain the fire, three of the
facility's eighteen storage tanks were drained down and
burned dry. This same facility suffered a more serious
explosion in January 2004, when a steam boiler at the LNG
plant exploded, killing 13 and causing an estimated $800
million in damage and a loss of more than 5 billion cubic
meters per year in production. The Ministry of Energy and
Sonatrach, the state-owned oil company, are conducting a
formal investigation into the most recent accident amid
mounting questions about Skikda's overall safety record.

3. (U) Algeria's reserves and potential: Algeria's proven oil
reserves are estimated at a modest 11.8 billion barrels.
According to industry sector studies, sizable new finds and
greater use of enhanced oil recovery techniques would
increase probable reserves to as high as 43 billion barrels.
SIEVERS