Business World

Wednesday 16 October 2019

Saudis are facing months with oil output cut by half

Attack: Damage to the Aramco refinery is seen on satellite images. Photo: Reuters
Attack: Damage to the Aramco refinery is seen on satellite images. Photo: Reuters

Anthony DiPaola, Javier Blas and Will Kennedy

Saudi Aramco could take months to restore output at its giant Abqaiq plant, keeping up pressure on oil prices as the geopolitical consequences of the worst single attack on global supplies continued to reverberate.

Brent crude traded at around $69 a barrel after jumping the most on record.

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US President Donald Trump said "we pretty much already know" who was responsible, signalling Iran was to blame. Saudi Arabia has said Iranian weapons were used.

Oil prices surged on the prospect of more conflict in the region, as well as on the supply shock.

The question now is how quickly the kingdom can recover from the strike, which knocked out half its production, or roughly 5pc of global supply. Saudi Arabian officials said they face a "severe" disruption measured in weeks and months.

While Aramco is still assessing the state of the plant and the scope of repairs, it currently believes less than half of the plant's capacity can be restored quickly.

"Damage to the Abqaiq facility is more severe than previously thought," said Amrita Sen, chief oil analyst at Energy Aspects. "While we still believe up to 50pc of the 5.7 million barrels a day of output that has been disrupted could return fairly swiftly, full resumption could be weeks or even months away."

The loss of Abqaiq is the single worst sudden disruption to the oil market.

Saudi Aramco is firing up idle offshore oilfields - part of its cushion of spare capacity - to replace some of the lost production.

Aramco customers are also being supplied using stockpiles, though some buyers are being asked to accept different grades of crude oil. The kingdom has enough domestic inventories to cover about 26 days of exports, according to consultant Rystad Energy.

In an extraordinary trading day on Monday, London's Brent crude leaped a record $12 in the seconds after opening, later settling 15pc higher at just above $69, the biggest one-day percentage gain since the contract began trading in 1988.

Abqaiq's stabilisation towers, which separate gaseous compounds from crude oil, could take the longest to repair, said Phillip Cornell, a former senior adviser to Aramco. "They can take weeks or months to get specialised parts," he said.

Five of the 18 stabilisation towers appear to have been taken out and pictures show "very specific, accurate targeting of those particular infrastructures," Cornell said.

Bloomberg

Irish Independent

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