Takeaway: Attack is “the most serious disruption of Saudi oil in history” and damage to the site appears “more serious than original estimates.”

Replay | Energy Policy: Saudi Oil Attack – Abqaiq Primer & Damage Assessment

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Hedgeye held a conference call Monday afternoon to update clients on the attacks at the Saudi oil processing facility in Abqaiq and impacts for oil markets and geopolitics. Two excellent speakers, including the former EIA Administrator who has visited the Abqaiq facility and the former OPEC President, provided clients with valuable insights and shared their analysis of next steps.

The conference call speakers were:

• Guy Caruso, former Administrator of the US Energy Information Administration (EIA) and now a senior advisor for energy and national security at the Center for Strategic and International Studies (CSIS);

• Chakib Khelil, former OPEC President & former Algerian Energy Minister.

Click on the replay link above to hear the full recording of the call.  Some highlights are provided below.

Caruso called the attack “the most serious disruption of Saudi oil in history” and said it was larger than the Iraq invasion of Kuwait that displaced 4.5 million barrels per day. Caruso said Abqaiq’s attack has shut off 5.7 million barrels per day.  

Caruso said the damage appears to be “more serious than initial assessments” and that his Saudi contacts were “less optimistic that normal operations would restart any time soon.”

Caruso, who has visited Abqaiq twice, said that there are layers of security and patriot missile batteries around the facility but that sophisticated “new technologies with drones and cruise missiles made it difficult to shoot down.” Caruso also said he believes “some form of retaliation is certainly likely.”

Khelil commented that there is concern about the possibility that the attack can be repeated and “if so, it will bring about a new paradigm for the oil market that is more significant than any short term rise in prices.”  

Khelil also believes “the Aramco IPO will likely be delayed until the company can determine how to repair the damage and deal with the security issue” adding that “possible investors worrying about the vulnerability of major installations is not a good thing.”