It looks as though the Iran-backed Houthis have finally managed to deal a meaningful blow to Saudi Arabia via cross-border drone attacks.
Although initial indications suggested the fires – one of which affected the world’s largest oil processing facility at Abqaiq – were under control, subsequent reports revealed a massive loss of production capacity.
This time, the Houthis deployed 10 drones in strikes on Abqaiq and Khurais.
This is a major incident. One source who spoke to Reuters said as much as 5 million barrels per day of crude production has been affected. If that’s accurate, it’s nearly half of Saudi output. That figure was later confirmed by a source who spoke to Bloomberg. Aramco hopes to restart lost output “within days”.
Situated roughly 40 miles from Aramco’s headquarters, Abqaiq “handles crude from the world’s largest conventional oilfield, the supergiant Ghawar, and for export to terminals Ras Tanura, the world’s biggest offshore oil loading facility”, Reuters notes, adding that the Khurais “contains the country’s second largest oilfield”, with production capacity of 1.45 million barrels a day.
Abqaiq’s processing capacity exceeds 7 million barrels per day and handles some two-thirds of the kingdom’s production. Bloomberg says customers can count on supplies for at least a few weeks thanks to Aramco’s ability to draw down on a sprawling network of storage, including tanks in Rotterdam, Okinawa and Sidi Kerir.
Company officials convened an emergency meeting to assess the situation. This comes at a particularly inopportune time. The kingdom is ramping up efforts to take the world’s most profitable company public, and last week replaced Khalid al-Falih as Energy Minister with Mohammed Bin Salman’s half-brother, Prince Abdulaziz Bin Salman.
Satellite imagery from NASA showed a large plume of smoke over Abqaiq, and as Bloomberg notes, “four additional plumes to the south-west appear close to Ghawar” which, while not attacked directly, sends its oil to Abqaiq. “The smoke could indicate flaring”, Bloomberg went on to say, adding that “when a facility stops suddenly, excess oil and natural gas is safely burned in large flaring stacks”.
Aramco has chosen Goldman, JPMorgan, BofA and others for lead roles in the IPO, which may come within months.
The Houthi attacks underscore the inherent precarity of the company’s infrastructure given its proximity to the conflict in Yemen, where the Houthis have spent the last four years staking out their claim for a group picture next to the dictionary entry for the word “persistent”.
Just last month, the Center for Strategic and International Studies warned that this was possible. “Though the Abqaiq facility is large, the stabilization process is concentrated in specific areas, including storage tanks and processing and compressor trains — which greatly increases the likelihood of a strike successfully disrupting or destroying its operations”, the center said.
Yemen recently deteriorated into a “civil war within a civil war” as UAE-aligned separatists broke with the internationally-recognized government of the Saudi-backed Abd-Rabbu Mansour Hadi, complicating the fight against the Houthis.
Aramco on Saturday said it believes it can restart lost production “quickly”.
A military spokesman for the Houthis claimed the attacks affected refineries at both sites, which, for reference, sit over 600 miles from Yemen’s capital, Sanaa. “Our upcoming operations will expand and would be more painful as long as the Saudi regime continues its aggression and blockade”, he said.
Predictably, Qassem Soleimani celebrated on Twitter, lauding the Houthis’ efforts.