from Energy Realpolitik and Energy Security and Climate Change Program

Scale and Nature of Attacks on Saudi Oil Makes This One Different

Smoke is seen following a fire at Aramco facility in the eastern city of Abqaiq, Saudi Arabia, September 14, 2019. REUTERS/Stringer

September 16, 2019

Smoke is seen following a fire at Aramco facility in the eastern city of Abqaiq, Saudi Arabia, September 14, 2019. REUTERS/Stringer
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In the swirl of conflicting reports about who might be responsible for the latest attack against Saudi Arabian oil installations, it is important not to miss what makes this latest attack categorically different from past skirmishes. Saudi Arabia and Iran have been engaged in a deadly proxy war for a number of years, and their respective proxies engaged in oil sabotage as far back as early 2018. More recently, Iranian-backed proxies have hassled international oil tankers, bombed an ExxonMobil operations center in Southern Iraq, targeted a key Saudi pipeline, and attacked a strategically important oil storage hub in the United Arab Emirates. These previous incidents, while signaling the vast vulnerabilities of the Gulf region’s massive energy operations, failed to rise to an emergency because the damages involved were relatively easy to ameliorate. Many considered these early aggressions as an ominous warning sign that more serious attacks could come if tensions continued to escalate. That day has arrived.

The perpetrators of this past weekend’s attack on critical infrastructure at Saudi Arabia’s second largest oil field at Khurais and its large and vital crude oil stabilization center at Abqaiq selected high value targets that could potentially maximize the size and length of a partial cessation of Saudi crude oil exports. A U.S. government assessment suggested that the Abqaiq facility that is used to strip impurities such poisonous hydrogen sulfide out of raw crude oil to prepare it for shipping and use suffered from direct hits in at least 17 different places. Damaged stabilization towers and gasoil separation plants (GOSPs) that remove natural gas, sand, and natural gas liquids from raw crude, can be costly and time-consuming to repair or replace.  The targets were selected with an eye to disrupt a large portion of Saudi Arabia’s oil deliveries to market for a long time, not the couple of days more typical of a minor pipeline attack or small volume of a diverted oil tanker.  Shutting down oil fields in a sudden, unplanned manner, which resulted from the extensive damage to the stabilization units, can also create its own unique set of problems. U.S. security analysts have been gaming a missile attack on the Abqaiq stabilization complex for years, apparently not terribly accurately.  

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The immediate interruption of 5.7 million barrels a day of Saudi crude oil exports due to the attack generated the largest price jump in U.K. Brent crude futures on record. The disruption is currently being offset by sales of oil from Saudi storage facilities. Increases in production from unused Saudi oil fields and from spare capacity from other countries such as the United Arab Emirates will provide offsets in the longer run.  About 5.2 million b/d was lost to markets in the aftermath of Iraq’s invasion of Kuwait in 1990. During the eight year Iraq-Iran war that ended in 1988, the oil export infrastructure of both Iran and Iraq was mostly destroyed.

The problem moving forward for Saudi Arabia (and for the United States, should it desire to intervene) is that it may prove tricky to thwart new oil-related attacks by Iran and its proxies. It is very unclear if a U.S.-led coalition preventative attack against missile batteries could even be effective. Iranian proxies and direct Iranian military assets are located on multiple fronts along the Saudi border. Distances are close and oil installations of other countries could also become at risk in any forceful escalation of violence. With so many armed parties across the Middle East, identifying and eliminating major threats to oil facilities will be challenging. Such threats can take many forms including missiles, armed drones, and cyber-attacks. Both the United States and most likely Iran have capability to engage in cyberattacks against each other’s electricity networks. 

The real question is why has the deterrence of more conflict, even potentially against targets inside the Iranian homeland, failed to discourage such a large jugular attack on Saudi Arabia’s critical oil nodes? The explanation that it is the best way to force a negotiation rings hollow.

The larger move against Saudi Arabia’s oil lifeblood puts the United States in a quandary. On the one hand, the Trump administration has been eager to consider stricter measures, including military strikes, that might deter Iran from new provocations. On the other hand, the United States and its allies surely want to avoid triggering a wider conflict. The attacks on Abqaiq and Khurais seem to give Iran several benefits, including putting the Saudi regime under greater financial pressure, creating a vast political dilemma for President Donald Trump in an election year, and enhancing perceptions of Iran’s hard power in the region.  

If one could turn back the clock, doing more to end the bloodshed in Yemen might have provided more maneuvering room before things got to this regrettable juncture. Gestures toward negotiations, including the shuffling of higher volumes of IOU Iranian crude oil exports towards Asia and talk of credit lines, appear stillborn. The region is lurching towards potential economic disaster that will be made so much worse as the climate warms.  Iranian leaders might see geopolitical victory on their horizon but it could turn out to be a hollow one for their 80 million people.

More on:

Saudi Arabia

Iran

Oil and Petroleum Products

Geopolitics of Energy

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