17 January 2013 | Anna Reitman

As Ghana’s offshore oil industry matures, risks from piracy are rising for the supply chain, says Anna Reitman.

Increasingly sophisticated pirate attacks in the Gulf of Guinea are rivalling even Somalia’s high-profile illegal operations. And while the oil industry in Ghana grows – it is expected to reach 500,000 barrels a day by 2015 – so, too, do the risks posed to the emerging offshore sector.

Attacks in Ghanaian waters are comparatively low, according to risk management firm Maplecroft. But the country is particularly at risk because of the massive Jubilee oil field, which companies such as Tullow and Anadarko are developing with Ghana National Petroleum.

The majority of oil from Ghana is exported to US markets. This is also true of the region as a whole, which produces some three million barrels a day. It is estimated that around one-quarter of US oil supplies will come from Gulf of Guinea countries by 2015.

“Even beyond the oil industry, about 90 per cent of Ghana’s trade uses maritime routes, so piracy undermines an already fragile economic stability,” says James Warwick, senior Africa analyst at Maplecroft. “This leads to knock-on effects, such as decreased port revenues, driving up insurance premiums for exporters, raising the prices of commodities. Piracy could create serious economic situations on the mainland.”

Warwick says companies are taking two major approaches to risk mitigation. The first, to deploy non-lethal deterrents for transiting vessels, such as increasing speed through danger areas or more security conscious measures like citadels on ships – armoured rooms that can control vessels remotely.

The other approach is far more controversial and fraught with legal implications – the use of armed guards on board. “It is gaining in popularity, but also poses a danger because piracy attacks in the Gulf of Guinea are far more violent than elsewhere in Africa,” says Warwick. “Companies can face reputational risks due to perceived complicity with the actions of state or private security forces employed to protect assets and personnel, including human rights abuses,” he says. “Employing well-trained, certified private security forces that have not been associated with human rights violations can be the best means of mitigating these complicity risks for investors.” 

Rules and liabilities

One source familiar with the regional situation says that it is a complex issue because as soon ships enter territorial waters, they come under the jurisdiction of that coastal state. Governments have differing rules on the carriage of armed security personnel and the use, embarkation and disembarkation of firearms and security equipment and regional governments have yet to provide clarity on what rules apply to weapons and security equipment on board ships. There are also liabilities issues. A private security company may market itself as being insured and liable for the action of its personnel, but if an incident occurs on board a tanker owned by an oil company with deep pockets, then which one do you think lawyers are going to go after? Meanwhile, in some countries such as Nigeria, only the country’s government security personnel are permitted to operate.

Morten Glamsø, senior adviser at the Danish Shipowners’ Association (DSA), says that members are urged to conduct a risk assessment based on what kind of cargo is being transported, since mostly tankers are attacked, and that preferred guidance includes being free berthed in the port or in an appropriate protected area if ships have to drop anchor outside the port. Members of DSA have between six and 10 ships trading in the area at any given time and the association ensures members’ concerns about piracy are on the political agenda.

“It is important for governments to live up to their responsibility. There has been some improvement, for example Nigerian naval forces patrols, but the underlying reasons for the problem continue so shipowners and seafarers still feel that there is much to be addressed,” he says.

Companies have obligations as well, one of which is to report all incidents. However, says Glamsø: “We are aware of under-reporting across the industry. We believe that shipowners need to be honest about the incidents so we can put political pressure on governments in the region.”

Ghana central command

Some of the reasons behind under-reporting are economic ones. As soon as an attack is reported, the ship becomes a potential crime scene and may be delayed from sailing. That is one of the problems targeted by industry-led initiatives such as the Maritime Trade Information Sharing Centre (MTISC) in Ghana, in co-operation with the International Maritime Organisation (IMO).

The initial focus of MTISC, explains Chris Trelawny, senior deputy director of the Maritime Safety Division of the IMO, will be on countering piracy and armed robbery through increased maritime situational awareness, such as assisting merchant ships to avoid trouble in the first place. But the intention is to widen the scope to include other maritime law enforcement roles.

MTISC is being largely driven by the Oil Companies International Marine Forum, which is a subset group of the oil companies focused on the maritime transport part of the supply chain. Ghana is the favoured site because it is strategically located with a supportive government. In addition, SM understands the country’s navy is being modernised to boost territorial patrols with new purchases of patrol and attack vessels as well as investment in expanding the southwest dockyard. 

Trelawny points out that although navies have a role, especially in the absence of coast guards, the IMO would like to see better co-operation between military and civilian law enforcement agencies.

“Piracy is a land-based crime and the solution is good policing and governance ashore. Oil refineries receiving [hijacked cargo] aren’t asking enough questions and we know there are a number of illegal oil jetties,” he says.

In August last year, IMO piloted a tabletop exercise in Ghana towards development of a multi-agency approach to maritime security and law enforcement. It is an extension of a Memorandum of Understanding developed in 2008 by IMO and the Maritime Organisation of West and Central Africa (MOWCA) and currently signed by 15 member states from the region, aimed at the establishment of a sub-regional coastguard function network. Aside from combating piracy, Trelawny adds that protection of fishing grounds is strategically important. There is a serious danger that in the next 10 years, unregulated activity will make fishing grounds unsustainable.

“The problem in the region as a whole is one of maritime law enforcement, getting both legislation and capability in place,” Trelawny says. “Ghana has recently started pumping oil and is hopefully learning the lessons of what is happening in other countries.”