The drone attack on the Saudi Arabian Oil Co., or Saudi Aramco, facility in Abqaiq could be a costly one for Aramco in more ways than one, analysts at the Atlantic Council told journalists Sept. 16.
The attack, which Houthi insurgents from Yemen have taken responsibility for, knocked approximately 5.7 million barrels per day of crude oil off the market overnight. According to Phillip Cornell, a non-resident senior fellow at the Atlantic Council's Global Energy Center, such an outage is an indication that the massive Abqaiq refinery had been taken offline completely.
"Abqaiq is a very central facility to Saudi Arabian oil production. It's a central point of refining Saudi crude," he said. "[The outage] is very shocking in terms of total global output."
Cornell said that satellite footage showed five of the Abqaiq plant's 18 stabilization towers, which are used to separate other hydrocarbons from crude oil, were destroyed in the drone attack. The absence of those towers could limit the amount of light, sweet crude produced by Aramco for some time, leading to a shortfall of that product. While the lack of light, sweet crude could be a global irritant, the precision of the attack is likely of greater concern to the Saudis.
"They can attack specific sites that hurt," Cornell said. "This kind of accuracy … changes things."
The attack on the Abqaiq facility comes at a poor time for Aramco and the Saudi government as the anticipated Aramco IPO is picking up steam. Now, investors who are largely unfamiliar with the region may recognize the risk faced by Abqaiq and other Aramco facilities to attack. This is not the first attack on the Abqaiq facility; al-Qaida terrorists attempted an assault in 2006 and Iraq fired Scud missiles at the refinery in January 1991 during Operation Desert Storm.
"This will have a negative impact on Aramco shares going into the IPO and the attractiveness to foreign investment they've been pursuing aggressively," Cornell said.
In a news conference held Sept. 17, Saudi Aramco president and CEO Amin Nasser said the IPO is still on track. "We have said we are ready and will proceed with the IPO when our shareholder takes the decision," Nasser said.
While Nasser said the company's production capacity would be fully restored by the end of September, the source of the attack could lead to larger problems than the outage it caused. The Houthis are supported by Iran, Saudi Arabia's primary enemy — and the U.S. is indicating the attack may have come from Iran itself. If Iranian involvement is proven, it could lead to a military confrontation between Iran on one side and the U.S. and Saudi Arabia on the other.
"If the Saudis believe the Iranians sent these missiles or drones into Saudi territory, that requires a military response," nonresident senior fellow Ellen Wald said.
What the U.S. will do if Iran is indeed found to be the culprit was the subject of debate. Kirsten Fontenrose, the director for regional security for Middle East programs said President Trump's "locked and loaded" tweet directed at the Iranians was likely "saber-rattling," and any American military response would be proportional to the attack on Abqaiq. A full shooting war, she said, is a prospect both sides should be looking to avoid.
"There's nothing for [the Trump Administration] to win here; the U.S. is in an election season and the American people don't want to go war," she said. "Iran cannot afford to go to war, economically. Militarily, they really can't afford to go to war. Nobody benefits from escalating this."
Non-resident senior fellow Jean-Francois Seznec, on the other hand, took a far more worrisome approach. Citing the need of the Saudis not to lose face over the attack and decades of antipathy between Saudi Arabia and Iran, Seznec said the prospect of a full-scale conflict is a real one.
"We're talking war here … I think the Iranians are playing with fire here, and they think the president will not respond forcefully," he said. "We're just in an inertia of war. That's what's so scary. It's not good for anybody, but nobody can stop it."