Iraq 10 years on: energy risks and opportunities

It is almost ten years since the invasion of Iraq, yet today the country still sees bombings and shootings on a daily basis. The central provinces remain socially fragmented with one of the highest rates of terrorist attack in the world. The north of the country also sees a high degree of political risk amid an ongoing competition for control between the federal and regional Kurdish governments.

Violence in figures

According to AKE figures there were at least 2940 separate attacks in Iraq in 2012. More are likely to go unreported. This equates to an average of at least eight per day. Thousands of people, including civilians and members of the security forces, were killed. It hardly appears the most attractive investment climate for anyone looking to work in the lucrative oil and gas industry – a sector which many cynics thought of as the main reason motivating international governments to invade the country in the first place.

Yet there is a part of the country which has emerged as relatively stable – albeit not without risk. The oil-rich south is comparatively quiet today and has been for several years. It saw extensive violence in the aftermath of the invasion, civil unrest remains an occasional concern and militant groups still conduct attacks, but day-to-day it continues to see relatively few incidents of violence in comparison to other parts of the country.

Of the violent incidents recorded in Iraq last year, 1357 took place in the central region and 938 in the north. In contrast the southern region experienced only 89 incidents, around 3% of the countrywide total, despite the area accounting for almost a third of Iraq's territory.

The positive South

Having a relatively homogeneous society of Shi'ah Arabs, the region has been spared from much of the inter-communal killing that continues to wrack parts of the country with more mixed populations. Local residents feel more represented in parliament and while they are certainly not content with current conditions, they have less fear of marginalisation by a government that is also predominantly Shi’ah.

The longer term outlook is also bolstered by the natural resources present in the area. The region has become the focus of foreign investment, construction projects and resource exploitation. Infrastructure, while still woefully under-developed, is nonetheless being improved to support the growing energy sector.

Local discontent

That said, local sensitivities could still be enflamed if the energy sector fails to produce tangible benefits for the community. On 4 March several hundred residents broke into the West Qurna Phase Two oilfield in the north of Basrah province. Complaining over a lack of employment in the area it was reported by Reuters that they caused damage to the offices of an Iraqi engineering company hired by Samsung. They were then prevented from breaking into the Samsung office itself, throwing stones at the gate during the attempt.

Civilian employees at the site reportedly left the facility temporarily over safety concerns while the incident took place but no physical harm to any people was reported. Nonetheless, security measures are likely being rethought at the facility and the protest should serve as a reminder that political violence remains a concern, even in the normally quiet south. After the terrorist attack at the In Amenas facility in Algeria earlier in the year it is likely that energy firms throughout the Middle East and North Africa are reconsidering large parts of their risk mitigation procedures to ensure that future infringements are kept to a minimum.

The political violence outlook

As Iraq evolves into a much anticipated energy giant it is increasingly likely that members of the public will view the oil and gas sector with a sense of entitlement, especially if they live in areas with extensive reserves. Unless energy sector expansion brings local jobs, infrastructural development and a rise in standards of living, then similar incidents are likely to continue occurring and may even increase in intensity.

Companies involved in the oil and gas sector should therefore view the south of Iraq as a comparatively quiet area in which to do business in the country. However, if they want to prosper and minimise risk they will have to bear in mind that the population will be prone to demonstrating if they do not feel as if the energy sector is benefiting them. As well as proper public relations with local residents, a simultaneous series of protective measures should also be taken to protect employees and critical assets so as to reduce the risk of further safety breaches. The potential rewards of working in the oil-rich region will be high, but companies will have to take appropriate measures if they are to avoid the risks likely to persist in the south of Iraq.

Authors:

John Drake is an Iraq specialist from AKE, a global security and risk management firm. Melissa Trebil is a research assistant specialising in Iraqi security and politics at the company. For more information on AKE’s services please email: intel@akegroup.com or call +44 (0)20 7816 5454. You can also view the company’s Iraq website at http://www.akegroup.com/iraq and follow John on twitter at http://www.twitter.com/johnfdrake.

Published on 21/03/2013

 
 

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