Business

Saudis seek to calm markets after drone attacks on its oil plants

Wave of drone strikes knocks out nearly half of kingdom's crude production

RIYADH Saudi energy giant Aramco is battling to reassure markets after devastating attacks on two oil plants, where a prolonged shutdown risks roiling investor confidence ahead of the state-owned giant's mega stock listing, analysts say.

A wave of drones struck Abqaiq - the world's largest oil processing facility - and the Khurais oil field in eastern Saudi Arabia, knocking out nearly half of the kingdom's crude production and exposing the vulnerability of its energy infrastructure.

While Tehran-backed Yemeni rebels claimed responsibility for the pre-dawn strike on Saturday, Washington blamed Iran for what it called an "unprecedented attack on the world's energy supply".

It is a major test for the kingdom's newly appointed energy minister Prince Abdulaziz bin Salman - a half-brother to the crown prince - as the attacks could dampen investor confidence in Aramco's upcoming two-stage stock market debut.

The attacks have effectively turned off six per cent of the global oil supply, raising the possibility of a spike in prices when markets re-open today - even as Aramco said it will tap into its reserve stockpiles to offset the disruption.

"The worst case scenario (for pushing oil prices higher) is an incident that takes a large amount of oil production offline in Saudi Arabia," said energy expert Robert Rapier.

"If they can get production back online pretty quickly - or at least assure the markets they can - you might not see an enormous price spike," Rapier wrote for Forbes online.

DAMAGE 'UNCLEAR'

The full extent of the damage at the plants and how long it will take to repair is unclear, with analysts warning that an absence of information could fuel trader speculation.

Saudi authorities, known for their penchant for secrecy, have not allowed reporters near the plants where security has been tightened since the attacks.

Bloomberg News reported that Aramco expects to restart most of the operations "within days".

Saudi Arabia is known to have vast underground storage facilities with a capacity of tens of millions of barrels of various refined petroleum products that can be tapped during times of crisis.

For many traders, the temporary loss of production is secondary.

The use of seemingly low-grade drones to strike the world's most profitable company highlights the easy vulnerability of oil infrastructure in the kingdom, which has splurged billions on sophisticated defence equipment.

"Abqaiq is the heart of the system and they just had a heart attack," said Roger Diwan, an energy expert at consultant IHS Markit was quoted as saying by Bloomberg News. - AFP

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