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Says geopolitical risk premium 'very low'

Work on resilience still needed

London — The global energy complex, including governments and markets, has yet to fully comprehend the implications of last month's attack on Saudi oil facilities, Shell CEO Ben van Beurden said Wednesday, adding he was "puzzled" by the relaxed attitude of markets.

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Speaking at the Oil & Money conference in London, van Beurden fulsomely praised Saudi Aramco's "fantastic" response to the September 14 missile attacks on the Abqaiq processing facility and Khurais oil field, and the kingdom's work to maintain oil supplies and repair the damage.

The oil price reaction to such a scenario five years ago, against a backdrop of low Iranian and Venezuelan supply, would have been quite different, and demonstrated the "resilience" of today's market, van Beurden said.

But he confessed himself "puzzled" by the price response, in which a brief dramatic spike in prices soon subsided, and said the events needed further consideration.

"This is I believe still unprecedented. You can't say 'Oh, this is going to be one-off, don't worry.' But it also shows that the market is in a completely different place than it used to be," van Beurden said.

"I would not have expected oil prices to be back at $58/b. The geopolitical risk premium is very low at this point, or it is offset by some other events, and I think that is something that many of us would not have expected. I'm a little bit puzzled by the -- it's not quite resilience -- by the relaxed attitude of markets to the shocks," he said.

In terms of the response by corporations and governments, Saudi Aramco is in all likelihood "buffing up" its "policy of resilience," he said.

However, "we have to continuously ask ourselves what could happen. The unthinkable has happened and perhaps might happen again in other forms and fashions, so therefore we have to start factoring that in, whether it's the design of the facilities that could be at risk, or the way governments and others manage the resilience in markets, by strategic storage,policy decisions around it," van Beurden said.

"There is a shift, but that shift hasn't really materialized yet in a new market paradigm as far as pricing is concerned," he added.

The September 14 attacks took 5.7 million b/d of Saudi Arabia's production capacity offline.

At the same event Aramco CEO Amin Nasser said Saudi Arabia's crude production had returned to pre-attack levels of around 9.9 million b/d, and its maximum sustained capacity of 12 million b/d could be restored earlier than the end-of-November target that officials have been aiming for.

-- Nick Coleman, nick.coleman@spglobal.com

-- Edited by Jonathan Dart, jonathan.dart@spglobal.com