Dubai: Saudi Arabia is recovering faster than expected from the biggest attacks ever on its oil industry, beating its own target for restoring capacity by about a week.
State oil producer Saudi Aramco has boosted total production capacity to more than 11 million barrels a day, according to people with knowledge of the situation. The news helped to push crude down by as much as 1.8% in London as the kingdom’s efforts to resolve the worst disruption of output in history help avert a global supply crisis.
The attacks this month by more than two dozen missiles and drones threw into doubt Saudi Arabia’s role as an anchor of stability in global energy markets and its ability to convince investors to buy shares in Aramco’s planned initial public offering. The U.S. blamed Iran for the strikes, the latest in a string of tanker bombings and pipeline assaults since May. Iran denied responsibility for the latest attacks which were claimed by Houthi rebels that the Saudis are battling in Yemen.
The Sept. 14 attacks caused severe damage to crude-processing plants at Abqaiq and the Khurais oil field and drove a record spike in oil prices. The precision strikes punched holes in towers and tanks that strip impurities, water and natural gas out of crude to prepare the oil for export. Ruptured pipes sparked fires that left equipment scorched and took hours to extinguish.
Since then, Aramco has been working flat out to restore capacity, while maintaining normal supplies to customers by tapping inventories and ramping up other fields. It has now restored production at the Abqaiq and Khurais facilities to the levels they were operating at before the attacks, said the people with knowledge of presentations Aramco made to industry analysts in Dhahran on Wednesday ahead of the IPO it plans to kick off next month. A representative for Aramco had no immediate comment.
Saudi Arabia has positioned itself as the swing supplier in global markets for decades by maintaining spare production capacity that would allow the kingdom to supply more in case of shortages. Since 2017, it has been mostly pumping below the level it agreed with the Organization of Petroleum Exporting Countries and allies in an effort to trim excess global stockpiles.
The Abqaiq processing facility can currently produce 4.9 million barrels a day and Khurais can get to as high as 1.3 million, according to the people. Aramco has said full capacity under normal circumstances at Abqaiq is 5.5 million barrels of crude daily and about 1.5 million at Khurais.
Despite Aramco’s efforts to assure the market, speculation persists that it will take months to repair the extensive damage caused by the attacks. The company has said it will bring back all the lost production by the end of the month, by when it will also restore capacity to 11 million barrels a day. The full capacity of 12 million won’t be available until November, it said Sept. 17.
Aramco isn’t likely to fully restore the 5.7 million barrels a day of lost output until the end of November, Amrita Sen, chief oil analyst and co-founder of London-based consultant Energy Aspects Ltd., wrote in a note Monday.
“We do not expect full Saudi spare capacity to be restored before sometime next year and we expect Aramco to swap crude quality around from lighter to heavier grades as it struggles to restart Abqaiq,” Sen wrote. About 2.5 million to 3 million barrels a day of the disrupted output has returned with the Khurais field and use of existing spare capacity, she said.
Saudi Arabia’s ethane and natural gas liquid production has largely been restored, the Saudi Press Agency reported, citing the country’s energy minister, Prince Abdulaziz bin Salman. Ethane production is at 900 million cubic feet a day compared to domestic demand of 940 million, while natural gas liquids output is at 880,000 barrels a day versus local demand of 792,000 a day.
The Saudi interruptions come as the oil market grapples with supply disruptions around the world and concerns over demand growth. Sanctions have choked off exports from Iran and economic strife has resulted in output plunging in Venezuela.
Saudi Arabia and the U.K. are calling for an international response to the aggression for which they said the Iran is ultimately responsible. The U.K. is waiting for the release of one its oil tankers that was seized and is being held off the port of Bandar Abbas for the last two months.