A major assault on oil infrastructure in Saudi Arabia sent shock waves across the commodities and equities markets but also exposed vulnerabilities for both the Saudi economy and U.S. citizens abroad.
The Sept. 14 attack on the Saudi Arabian Oil Co. facility of Abqaiq was the first successful attack against a facility that has been targeted more than once over the decades. It is well known in the region as a vital part of Aramco's infrastructure, but has largely been off the radar to people in the west. After the attack, which U.S. and Saudi officials have blamed on Iran, Abqaiq is now very much in the headlines.
Abqaiq has been targeted by both military strikes and terrorist attacks in the past, but those were largely overlooked by outside observers. This attack, however, knocked approximately 5.7 million barrels of oil per day worth of production off the global market, or approximately 5% of the world's total. The Saudi government has insisted that while the strikes did significant damage, the plant will be fully operational again in a short time. A tour of the facility given by Aramco and satellite imagery show repairs are already underway.
Abqaiq's primary purpose is a critical one to Aramco: to separate impurities from light, sweet crude and prepare it for export.
"Abqaiq is a very central facility to Saudi Arabian oil production. It's a central point of refining Saudi crude," said Phillip Cornell, a nonresident senior fellow at the Atlantic Council's Global Energy Center.
Abqaiq has been called a refinery, but that is not a fully accurate use of the term. It is a gas-oil separation plant.
"Abqaiq is the largest oil processing and stabilization center in the world. Its criticality resides in that it handles crude oil from various fields in Saudi Arabia, including from the giant Ghawar oil field as well as Shaybah and others," the Center for Strategic and International Studies said in an update. "These facilities [like Abqaiq] also typically contain blending tanks for modifying crude characteristics to create specific crude blends and gas and process tankage for storage and fuel."
The Sept. 14 attacks on the Aramco plant at Abqaiq are the first to successfully damage the facility. |
The Abqaiq plant includes multiple spheroids where gas is boiled off, as well as 18 stabilization towers. The light, sweet crude from the Saudi oil fields is "sweetened" by removing hydrogen sulfide. Natural gas and condensate separated during the process can be sent to other facilities, while the refined gas is sent to major Saudi ports like Ras Tanura and Jubail for export.
Satellite imagery shows that the spheroids, as well as five stabilization towers, were targeted in the attack.
The attack on Abqaiq caused the largest single loss of crude oil production to the marketplace in history. The Saudi government said Abqaiq is currently running at 2 million bbl/d of its 7 million bbl/d capacity, but the facility should be fully repaired by the end of September. Even though the damage is clearly significant, indications are things could have been far worse. CSIS said satellite imagery shows the damage to the spheroids is already being repaired and was not as major as it potentially could have been.
The Saudi government has said the damage done by the attack can be repaired by the end of September, and competitors seem to be taking them at their word. American independent producers, who might have jumped into the void caused by a long-term outage at Abqaiq, have remained quiet.
"The extent to which domestic producers ramp will hinge largely on the news about the extent of the damages," said Ken Medlock, the senior director for Energy Studies at Rice University. "They will be responsive to the extent price dictates."
After an early surge, prices have dictated little need for change. Brent Crude prices, which spiked to $69 per barrel Sept. 16, had dropped to $64.62/bbl by the market's open Sept. 20; West Texas Intermediate crude prices fell from $62.90/bbl to $58.45/bbl over the same period.
Even though oil prices stabilized as the week progressed, severe damage to the Abqaiq plant would hurt the Saudi economy significantly, a fact not lost on the nation's enemies. In January 1991, Iraqi dictator Saddam Hussein ordered a scud missile attack against Abqaiq; the notoriously inaccurate missiles missed their target by a few miles. In 2006, al-Qaida launched an assault on the facility but were repulsed by the Saudi army and Aramco security.
"The vulnerability Aramco faces … is well known to people versed in the subject," Atlantic Council nonresident senior fellow Ellen Wald said. "The attacks really bring that home."
Even though the United States has experienced an oil production boom and has debatably become the world's largest oil exporter, the light, sweet crude from Saudi Arabia differs greatly from the heavier crude produced in the Permian Basin. The loss of that crude, which is still heavily imported to the U.S., could cause shortfalls at American refineries and, in turn, production facilities depending on their refined products.
An economic hit may not be the only matter that could draw U.S. ire in the event of a more severe attack on the Abqaiq plant. What is overlooked, or is largely unknown, is that there is an Aramco residential compound just outside of the plant. Several thousand foreign nationals, including a large number of Americans, live there. A larger attack on the Abqaiq facility could lead to the loss of American lives, which would almost certainly lead to a U.S. response against the actor.

