Energy security in the 21st century – the Assurance Infrastructure Model (AIM)

The American National Petroleum Council’s report of last Summer concluded that up to $20 Trillion will have to be spent on energy infrastructure by the year 2030 in order to just keep up with projected world wide energy demand. This gigantic expenditure will have a profound impact on the capability and capacity of the private security industry to continue to provide a commensurate service which must be financially and operationally sustainable. As Russian/CIS energy projects grow and geographically expand within the CIS, and companies such as Gazprom and Rosneft metamorphose into INOCs, alongside the likes of Lukoil, a new Security/ Assurance Infrastructure Model (AIM) for energy operations in the 21st century (C21) is needed. The purpose of AIM is to secure operations both at home and abroad over the long term, covering the entire value chain from upstream to downstream. With physical security manpower costs escalating alongside an expanding and diversifying threat profile, security is becoming a concern of energy Boards everywhere. The commercial defence sector however, with its technologies & systems integration, management skills and sheer commercial scale, in alliance with two vital complimentary risk service providers (geopolitical consultancy and “soft” services) could be a partial solution to this problem.

C2G Energy has created a preventative model of energy security (AIM), which adds demonstrable, measurable and sustainable value to major infrastructure/energy projects in the C21. Its commercial technical partner for the AIM is L-3 Communications.

For “Big Oil”, NOCs and major energy infrastructure builders, working in partnership with a strategic AIM provider such as C2G Energy to provide a more economic driven, and sustainable security/assurance solution is operationally and financially appealing. The banks, insurers and governments financing these massive capital infrastructure projects over the next twenty plus years will insist on replacing costly response-led physical security strategies with a more preventative model, in order to limit from the very start their up-front and prolonged financial exposure. Thus C2G Energy advocates the gradual allocation of energy companies’ security budgets from a response dominated solution to one of prevention. Crucially, technology provided by L-3 Communications facilitates such a preventative and information driven AIM strategy.

Unfortunately for the energy client present western private security is still largely driven by a C20 response-led strategy devised in the seventies and eighties (quick reaction forces, crisis management, mobile patrols, etc) for threats then, some of which are now outdated and certainly financially unsustainable in the face of modern threats to an increasingly exposed, complex and trans-national energy industry. This is all compounded by a societal need for more hydrocarbon production from new regions, leading to increasing transaction costs and heightened commercial risk, especially in the case of the natural oil/gas transmission and LNG/GTL businesses, where the operational time frames are longer and the threats higher and more sustained. The financial risks are now far higher too. This last factor is the primary reason why a new security doctrine is now needed.

New security threats to energy
Along with the emerging influence of NOCs and supply side governments, a growing emphasis on gas and LNG and the steady political migration of the energy agenda from West to East, C21 threats to the energy industry are changing in both nature and effect. Physical threats do continue to challenge established vulnerabilities such as personnel and assets, but increasingly the manipulation of typical societal issues such as regional conflicts, climate change, mass migration, community relations and oil politics represent serious new economic-type security threats. Their effects, in terms of corporate governance and CSR, impact a company’s ROI, raise serious corporate liability and legislative issues and can result in damaged corporate reputation. All these factors therefore must be considered when determining the nature, scope and cost of any AIM solution for the energy industry. Pipelines are as vulnerable nowadays to an attack from a disenfranchised local population through whose territory it passes, as it is to criminal or terrorist activity. Furthermore the economic cost and loss of reputation to the energy company is greater from the disenfranchised farmer causing disruption than it is from the terrorist.

Rogue governments, war-torn populations, and sophisticated terrorists are well aware of their increasing power to disrupt energy operations across the globe. Therefore any Assurance model will require additional specialist input from other types of service providers to sit alongside established security providers. The nature of threats to the energy industry is widening and whilst new solutions are appearing, they are generally not yet coordinated as part of a holistic assurance/risk strategy; as a result their operational and economic effectiveness is at present often diffuse and limited. In a few exceptional cases operators are ahead of the game. The primary physical threat to BTC’s pipeline in Georgia for example was from potentially disenfranchised local communities along the route. This was nullified however by implementing a strategy of preventative technical security measures, alongside a community relations programme which ensured that the local population took “ownership” of the security of the pipeline and benefited economically as a result.

The response
Correspondingly, along side C2G Energy’s commercial defence partner, L-3 Communications, offering high technology solutions and thus a preventative measurable strategy, two other sectors are now incorporated into C2G Energy’s AIM service for the C21: geopolitical consultancy and “soft” service provision. The former can give insight and understanding into the strategies of IOCs and NOCs alike and the relationships between governments of both demand and supply countries. With 85% of the world’s proven reserves now in the hands of governments/NOCs and a world facing conflicts over diminishing resources (including food and water), coupled with environmental/climate concerns and political and economic uncertainty, an understanding of these factors as they effect their clients’ business is a fundamental requirement of any AIM solution.

In the case of soft services provision what increasingly damages an IOC or NOC energy company is an issue such as difficult community relations, for instance in the Delta region of Nigeria or in the Caspian region of Kazakhstan. Whilst the symptoms manifest themselves violently and are met with physical security measures the causes and often the solutions, lay elsewhere. For energy/infrastructure companies this illustrates a growing linkage between some types of physical threats and their non physical “softer” solutions. In many security situations nowadays soft services can make a crucial contribution to a sustainable security strategy and this is why increasingly, the “C” suite takes a keen interest in concepts such as sustainable development and community relations, as mishandling of these soft issues (more than any attack on company personnel or assets) can lead directly to difficult relations with host governments, loss of corporate reputation, difficulty in attracting project financing and a consequent drop in share price.

For operators in the Caspian and Caucasus especially, new and upgraded pipeline projects will face these challenges. Future international pipelines transiting to Southern /SE Europe and operations in Kurdistan will also require soft service solutions and a shrewd understanding of the geopolitical factors as well as technological security measures. The key AIM objective is the selection and coordination of the appropriate services, and a holistic implementation methodology.

The Mediterranean challenge
The growing energy linkage between Africa and Europe is now a keen Russian interest and exemplifies all 3 services that C2G Energy provides as part of its AIM strategy. Gazprom’s plans to build a pipeline from the Nigerian Delta to the N. African coastline and other Russian energy companies’ interests in Algerian gas projects are examples of high grade, long term risk projects that will face these types of hard and soft threats.

One of the softer security issues facing Russian energy companies as they move into a region such as Africa will be the relationship between security and environment. Climate change is a force multiplier for social instability (e.g. encourages mass migrations) and economic uncertainty and often occurs in the very same regions where oil is found; risk is therefore only compounded by these climatic fall-out factors. In N. Africa for example there is significant migration across the Mediterranean Sea to Europe. Countries such as Morocco, Libya and Algeria are already terrorist hot beds, and also have huge environmental and climatic problems (e.g. lack of water). Concurrently some of the biggest oil and gas/LNG and associated on/off shore pipeline projects are in these countries; many of them based along coastlines, exporting to European markets. C2G Energy has an array of soft services that can ameliorate such threats, in collaboration with the client and the host government(s).

Systems integration with local governments, technical early warning capability and even potential coordination with Mediterranean based Navies to fulfil a role in limited energy maritime security, (ocean pipelines, shipping and LNG facilities) is not inconceivable. L -3 Communication’s Oceans Group can provide a waterside security solution. At the heart of the system is the HarborGuard radar, optimized for the detection of small targets, such as RHIBs, canoes, or even surface swimmers; classification of a detected target is achieved by auto slaved EO devices and displayed on either a standalone workstation or integrated into an existing command and control centre. The system can be enhanced by the addition of numerous technologies, including, but not limited to, LRAD and laser dazzle devices, diver detection sonar, diver interdiction systems, vessel barriers or fibre optic intruder detection systems. L-3’s extensive portfolio of underwater technology also offers side scan sonar, ideally suited for undersea pipeline monitoring.

As the USA’s biggest provider of services to the Department of Homeland Security (DHS) and working closely with the U.S. Coastguard (which is responsible for coastal hydrocarbon pipelines and re-gasification facilities) the company has enormous experience of on/offshore pipeline security.

Finally, a great deal of geopolitical analysis is required in order to understand where, what, why and when the threat(s) will materialize. Factors such as relations between the contracting oil company and the host nation (e.g. Algeria or Libya) are important, as are the export destinations ( Spain, Italy, and Turkey) and the nature of the business at risk (oil pipeline, liquefaction plant, GTL facility, etc). Without this background geopolitical energy understanding the AIM plan could be seriously flawed.

The usefulness of the AIM strategy therefore in this Mediterranean scenario is self-evident.

Major gas companies like Gazprom and Kazmunaigaz illustrate well some of these security issues outlined above. In term of natural gas transmission the combination of “take or pay” deals with sovereign governments, transmission across hostile regions, requiring multi-national project finance with an ROI measured sometimes in decades is a considerable exposure for an energy company in the modern world. Similarly for companies like the recently merged Transneft and Transnefteproduct with its pipeline network expansion plans in the CIS and beyond, they too face new challenges for which present security arrangements may appear limited.

The AIM approach means that C2G Energy can provide a more integrated security plan at the point of delivery that addresses both short term security threats (of concern to the security manager) and the longer term preventative measures required by the “C” suite. Without such an approach major LNG/gas projects and geographically extensive pipeline systems faced with a sophisticated threat over hostile territory for example, could be fatally undermined.

Conclusion
The massive up front commercial and financial exposure of 21 st Century energy projects which are increasingly gas-oriented (and higher risk) requires a preventative, economic long-term approach to security which by definition must be technically driven. Ideally this should begin at the FEED stage. Energy geopolitical knowledge is crucial also, as is the role of soft services to counter some of the new sophisticated threats encountered when conducting modern trans-national energy operations.

The complexity of modern oil and gas threats are such that no single approach can cover all contingencies. The driver for change is that C20/established security companies are increasingly expensive, still focused on a response-type strategy, with large costly guard forces, and high corporate overheads. This is not addressing the “C” suite requirement and neither is it commercially sustainable nor value for money.

The AIM strategy offered by C2G Energy offers therefore dedicated and added value product/services supported by clear evidence of long term sustainability, which are financially measurable and make a key contribution to the client’s overall economic security and operational effectiveness. The key is the formation and application of complimentary assurance/security disciplines led by C2G Energy, working in partnerships to provide a ring fencing approach to energy security – along the entire Up/Downstream value chain.