Aramco attacks show company entanglement in Saudi politics – World

The weekend's drone attack on the world's largest crude oil processing plant in Saudi Arabia, which dramatically reduced global oil supplies, is the most visible sign of how Aramco's stability and security are directly related to that of its owners: the Saudi government and its ruling family. .

The strikes, which U.S. Secretary of State Mike Pompeo blamed on Iran despite Tehran's bitter denials, led to the suspension of more than 5{7be40b84a6a43fc4fae13304fce9a2695859798abfc41afd127b9f8b21c5f9c5} of the world's daily crude oil production, which emphasized how The company is vulnerable to conflicts in Saudi Arabia outside the country. borders of the country, particularly with the regional rival Iran.

That is very important because Aramco produces and exports more than 9.5 million barrels of oil from Saudi Arabia per day to consumers worldwide, mainly in Asia.

It also occurs when the state company is heading towards a partial public sale. To prepare for an initial public offering, the company has recently taken steps to distance itself from the Saudi government, which is controlled by the ruling Al Saud family.

The plan to enumerate part of Aramco is key to the economic diversification efforts of Crown Prince Mohammed bin Salman who aim to prepare the kingdom for a future that relies less on oil exports for income.

While running to review the economy, he has also led Saudi Arabia as his defense minister to a war in Yemen that seems to have made the kingdom and, by extension, Aramco, more vulnerable to attacks.

Read: The Yemen War is a "living hell" for children: UNICEF

The pre-dawn attacks on Saturday were claimed by Yemeni rebels aligned with Iran, although there are doubts about whether the drones were launched from Yemen. Saudi Arabia has been at war with the Houthi rebels in Yemen since early 2015, but this is by far the most devastating infrastructure attack within the kingdom since the conflict began.

Eurasia Group notes that Saudi Arabia's air defense systems are designed to defend against traditional threats, but are poorly equipped to deal with asymmetric aerial threats from drones.

The attacks were directed at the Abqaiq processing facilities and the Khurais oil field. Abqaiq is home to the world's largest oil processing plant and oil stabilization plant, where oil is made safe for boat transportation.

The handling of the incident by Aramco is being closely monitored, particularly amid reports of a local 1{7be40b84a6a43fc4fae13304fce9a2695859798abfc41afd127b9f8b21c5f9c5} list of the company in November.

The public first learned of the attacks by area residents who uploaded videos and photos of the massive fires in the processing facilities in the eastern city of Buqyaq.

It was not until 22 hours after Aramco issued its own statement, recognizing that its plants had been attacked and that the daily production of 5.7 million barrels of crude oil had been interrupted.

The CEO of Aramco, Amin Nasser, was quoted in the brief statement saying that work was being done to restore production and that a progress update would be provided in approximately 48 hours. The Wall Street Journal He quoted Saudi officials as saying that one third of production would be restored on Monday, but a return to total production can take weeks.

What most commodity traders are looking for now is how long the production suspension will last. Aramco has not said what that term could be.

Crude oil futures skyrocketed 9.5{7be40b84a6a43fc4fae13304fce9a2695859798abfc41afd127b9f8b21c5f9c5} to $ 60 after trade opened on Sunday night in New York, a dramatic increase.

The sustainability of the rally will depend on an assessment of the magnitude and duration of the supply deficit, said Vandana Hari, founder of Vanda Insights of Singapore.

Hari said potential investors in Aramco will analyze the company's transparency and communication practices in this current crisis.

"That said, it is clear that Aramco does not operate independently of the government and is not free to manage its own messages," he said.

The loss of more than 5{7be40b84a6a43fc4fae13304fce9a2695859798abfc41afd127b9f8b21c5f9c5} of the world's oil supply, no matter how many days, is not a Saudi domestic issue, he said. "It is the concern of the entire world. With that in mind, the official communication on the matter has remained unfortunately short so far."

Hasnain Malik, head of capital strategy research at investment advisory and research firm Tellimer, said the attacks demonstrate security risks "that should be integrated into Aramco's valuation."

The Saudi crown prince has set Aramco's valuation at around $ 2 billion, but many estimates bring him closer to $ 1.5 billion.

Ranjith Raja, principal analyst at Refinitiv, said a major disruption to the Aramco processing plant will have an effect on the company's ability to meet customer expectations and contract requirements.

Ship tracking data already shows some 16 tankers that can transport 2 million barrels of oil anchored on the east coast of Saudi Arabia until further notice. About four ships are loaded each day from the main eastern port of Saudi Arabia, but since the attack only two have been loaded and abandoned their docks, Raja said.

The president of the United States, Donald Trump, emphasized the security and stability of Saudi Arabia as one of the largest and most vital oil producers in the world in a call to the crown prince "to offer his support" to the kingdom after the attacks .

The US Department of Energy UU. He has also said that he is ready to release crude from his Strategic Petroleum Oil Reserves if necessary to compensate for any disruption in the oil markets.

Energy expert Ellen Wald said that despite this setback and threats to the security of Saudi Arabia, "Aramco is safe."

"It has incredible built-in redundancies in its oil infrastructure and stored oil to compensate for any disruption," said Wald, president of Transversal Consulting and author of "Saudi, Inc .: The quest for gains and power of the Kingdom of Arabia" About Aramco

"In addition, Aramco has large oil reserves in both Saudi Arabia and other parts of the world that it can and is turning to ensure that all of its customers receive their oil shipments on time," he added.

Malimer of Tellimer said the attacks provide Aramco with the opportunity to demonstrate its resistance by minimizing interruptions to customers.

"In terms of the time of the IPO, this event is not useful, but only a very optimistic and opportunistic price of the agreement would have ignored this risk," he said.


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