Iran-backed Houthi rebels in Yemen, who have launched several drone attacks on Saudi targets, claimed responsibility.
Saudi Aramco had to cut production by as much as 5 million barrels a day as a precautionary measure after the attack on the Abqaiq plant, according to a person familiar with the matter. Most output will be restored with 48 hours, they said, asking to not to identified before an official announcement.
The biggest attack on Saudi Arabia’s oil infrastructure since Iraq’s Saddam Hussein fired scud missiles into the kingdom during the first Gulf war, the drone strike highlights the vulnerability of the network of fields, pipeline and ports that supply 10% of the world’s crude oil. A prolonged outage at Abqaiq, where crude from several of the country’s largest oil fields is processed before being shipped to export terminals, would jolt global energy markets.
“Abqaiq is the heart of the system and they just had a heart attack," said Roger Diwan, a veteran OPEC watcher at consultant IHS Markit. “We just don’t know the severity."
Facilities at Abqaiq and the nearby Khurais oil field were attacked at 4 a.m. local time, state-run Saudi Press Agency reported, citing an unidentified interior ministry spokesman. It didn’t give further details and no further updates have been released.
“For the oil market if not global economy, Abqaiq is the single most valuable piece of real estate in planet earth," Bob McNally, head of Rapid Energy Group in Washington.
Aramco, which pumped about 9.8 million barrels a day in August, will be able to keep customers supplied for several weeks by drawing on a global storage network. The Saudis hold millions of barrels in tanks in the kingdom itself, plus three strategic locations around the world: Rotterdam in the Netherlands, Okinawa in Japan, and Sidi Kerir on the Mediterranean coast of Egypt.
The International Energy Agency, responsible for managing the oil reserves of the world’s industrialized economies, said they were monitoring the situation, but the world was well-supplied with commercial stockpiles.
A satellite picture from a NASA near real-time imaging system published early on Saturday showed a huge smoke plume extending more than 50 miles over Abqaiq. Four additional plumes to the south-west appear close to the Ghawar oilfield, the world’s largest. While that field wasn’t attacked, its crude is sent to Abqaiq and the smoke could indicate flaring. When a facility stops suddenly, excess oil and natural gas is safely burned in large flaring stacks.
The attacks were carried out with 10 drones and came after intelligence cooperation from people inside Saudi Arabia, rebel-run Saba news agency reported, citing Houthi spokesman Yahya Saree.
“Our upcoming operations will expand and would be more painful as long as the Saudi regime continues its aggression and blockade" on Yemen, he said.
Saudi Arabia’s oil fields and pipeline have been the target of attacks over the past year, often using drones, mostly claimed by Yemeni rebels. Tensions in the Persian Gulf -- pitting Saudi Arabia and its allies, including the United Arab Emirates, against regional foe Iran -- have highlighted the risk to global oil supply.
Today’s attack is the largest and most sophisticated yet. The Houthi forces have used small and medium-sized unmanned aerial vehicles in various roles, according to a United Nations report. Some are loaded with munitions for use as “kamikaze drones" with a range of up to 1,500 kilometers.
Yemen’s Houthi rebels have been battling a Saudi-led coalition since 2015, when mainly Gulf forces intervened to restore the rule of President Abd Rabbuh Mansur Hadi and his government after the Houthis captured the capital, Sana’a. The conflict has killed thousands of people and caused one of the world’s worst humanitarian crises.
The attacks come as Aramco, officially known as Saudi Arabian Oil Co., is speeding up preparations for an initial public offering. The energy giant have selected banks for the share sale and may list as soon as November, people familiar with the matter have said.
Khurais is the location of Saudi Arabia’s second-biggest oil field, with a production capacity of 1.45 million barrels a day.
Abqaiq is home to the world’s largest oil processing facility and crude oil stabilization plant, and it has a crude oil processing capacity of more than 7 million barrels a day, according to the U.S. Energy Information Administration.
“The market will take notice of such a big supply outage and open strongly up," said Amrita Sen, chief oil analyst at consultants Energy Aspects Ltd. in London. “Of course if production can resume quickly, the rally will be short lived."