New Delhi: In what may provide a relief to the global energy markets, Saudi Arabian Oil Co., or Saudi Aramco has said that the suspended production capacity would come online by end of the month.
The drone attacks have caused the biggest-ever disruption in global crude oil supplies and has further escalated tensions in the Persian Gulf. Even as Yemen's Houthi rebels have claimed responsibility for the audacious attacks, the US has blamed Iran.
“Saudi Aramco President & CEO Amin Nasser said Tuesday that the Company’s production capacity, suspended earlier due to terror attacks on its plants at Abqaiq and Khurais, would be fully restored by the end of September," the world’s largest oil producer said in the first detailed statement after the attack.
While the reported strikes by 10 drones at Abqaiq and Khurais oil facilities, disrupted more than half of Saudi Arabia’s oil capacity or 5.7 million barrels per day (mbpd), the enormity of the situation can be gauged from the fact that it is being termed as the far worst shock to global supplies than when Saddam Hussein invaded Kuwait in 1990 and 1979 Islamic Revolution in Iran.
Given the growing hostilities in the region, US secretary of state Michael Richard Pompeo is on a visit to Jeddah, Saudi Arabia and Abu Dhabi, United Arab Emirates.
“The Secretary will begin his trip in Jeddah, arriving September 18. He will meet with Saudi Crown Prince Mohammed bin Salman to discuss the recent attack on the Kingdom’s oil facilities and coordinate efforts to counter Iranian aggression in the region," the US State Department said in a statement.
Saudi Arabia accounts for around 10% of the total global supply of 100 mbpd and is the second largest supplier of crude and cooking gas to India. India is particularly vulnerable as it is the world’s third-largest oil consumer — importing more than 80% of its oil requirements and around 18% of natural gas.
“These synchronized attacks were timed to create maximum damage to our facilities and operations. The rapid response and resilience demonstrated in the face of such adversity shows the Company’s preparedness to deal with threats aimed at sabotaging Aramco’s supply of energy to the world," Amin Nasser said in the company statement.
With the drone strikes disrupting around 5% of the global oil supply and further exacerbating tensions in West Asia; India is keeping a close watch on the rapidly evolving situation. S&P Global Platts in a report said that about three million barrels per day (mbpd) of Saudi Arabian crude supply will be affected for at least a month.
“During the news conference, it was disclosed that production at Khurais resumed 24 hours after the attack. Meanwhile, Mr. Nasser stated that production at Abqaiq is currently 2 million barrels per day and its entire output is expected to be restored to prior rates by the end of September," the Aramco statement said.
India, the world’s third largest oil importer is bracing itself to stem any impact on its consumers and has even been promised assistance by Russia’s largest oil company Rosneft PJSC.
“We have a hard-earned reputation for nearly 100 percent reliability in terms of meeting our international customers’ requirements and we have defended that," Nasser said in the statement.
Saudi Aramco had assured India that it will honour its supply contracts despite the production cuts. Of the cargo contracted from Saudi Aramco for September, Indian refiners have already received a major part. Aramco plans to use other ports to ship the balance, though the grades may vary.
“The Company adjusted deliveries and shipments to customers by drawing on inventories and offering additional crude production from other fields," the statement added.
The geo-political event has also raised the fears of an increase in transportation fuel prices in India with traders worldwide speculating if oil prices will cross the $100-mark yet again. Any sudden increase in global prices will affect India’s oil import bill and its trade deficit. Every dollar increase in the price of oil raises the import bill by Rs10,700 crore on an annualised basis. India spent $111.9 billion on crude oil imports of 207.3 million tonnes in 2018-19.
“Not a single shipment to an international customer has been or will be missed or canceled as a result of these attacks. We have proven that we are operationally resilient and have confirmed our reputation as the world’s leading supplier," Nasser said in the statement.
The Kingdom’s state owned company also holds importance for India’s energy security architecture. In the backdrop of its global IPO, Aramco has partnered to jointly develop the massive refinery and petrochemicals complexes in Maharashtra. In a deal valued at $15 billion, the Gulf nation’s national oil company is also in the process of buying a 20% stake in the Reliance Industries Ltd flagship chemicals and refining business.
“We have said we are ready and will proceed with the IPO when our shareholder takes the decision," Nasser said in the statement.