Rising Tide of Terrorism Against Energy Companies Impacts Global Markets

February 12th, 2008

Lately, there’s been a lot of discussion about the price of oil and its impact on global markets. Rising prices can, in part, be attributed to social and political instability in a growing number of oil producing nations. For example, an article recently published in the Washington Post served as a sobering reminder that consumer demand isn’t the only factor that has been driving up oil prices to record levels.

Royal Dutch Shell recently took a $716 million charge against earnings because of a major security breach near a key oil export terminal near the Forcados River in Nigeria. Insurgents initially attacked the facility in February 2006; and after several failed attempts by Shell officials to restore operations, the company was forced to shut down production. Damages during the subsequent period included thousands of barrels of crude oil, as well as the company’s 435-mile pipeline infrastructure. However, the most significant impact is the loss of an estimated 475 million barrels of oil per day that isn’t reaching the marketplace — at the same time that U.S. government officials are calling for OPEC member nations to increase production of petroleum products to keep domestic oil prices steady.

Terrorism impacts both global energy industry leaders and emerging companies on nearly every continent. For some time, executives of oil companies have been telling me that they are very concerned about the rising tide of terrorism against facilities around the world.

So is the U.S. Department of Homeland Security, which now mandates that companies have an emergency plan that is both complete, and exercised. In fact, John Gargett, ESS’ leading Crisis Management expert, has pointed out that enterprises — particularly energy companies — are becoming more vigilant because of the potential for increased attacks against their facilities. They are now conducting training exercises, often coordinating with local or regional emergency management agencies. Several of our customers have developed global crisis management programs, supported by the latest integrated information management technologies, to ensure companies can execute a robust response in case of acts of terrorism, major weather-related events or catastrophic operational incidents such as fires, workplace injuries and hazardous material spills to name a few.

While there is no way to prevent these kinds of incidents, investors aren’t jumping ship, even while energy companies’ assets are at significant risk. That’s because companies are doing more than ever to protect their interests and employees, as well as the interests of consumers worldwide.

Tags: department of homeland security emergency management homeland security nigeria oil royal dutch shell terrorism

Entry Filed under: Operational Risk Management, Crisis Management, Oil & Gas Industry