-By Julius Ogar
In the early hours of Saturday, the 14th of September, the global oil and gas industry was shocked with the report of attacks on two major oil facilities by drones in Saudi Arabia.
Al Arabiya, the Saudi Arabian local news network, had reported that two oil processing centres in Abqaiq and Khurais were attacked, and that the Saudi Interior Ministry reported fires at the two centres, which were later extinguished.
Saudi Arabia is the 18th largest economy in the world by GDP (769,878 million US$) with humongous oil reserves and a leading member of the Organisation of Petroleum exporting Countries, OPEC. The attack cut its oil production quota by 5.7 million barrels.
According to reports, Yemen’s Houthi rebels claimed responsibility for the bombing. The Houthis have fought against the Yemeni government supported by Saudi Arabia for many years. However, a Houthi spokesman, Brig.-Gen. Yahya Sare’e, reportedly said the group’s forces “carried out a massive offensive operation of 10 drones targeting Abqaiq and Khurais refineries.
Reacting to the attack, United States President Donald Trump had threatened that the US is “locked and loaded” and ready to respond to attacks on petroleum processing facilities in Saudi Arabia, claiming the evidence pointed to Iranian involvement.
The attacks disrupted more than half of Saudi’s oil output and affected global supplies. It also cut oil output by 5.7 million barrels daily, more than five per cent of global crude supply. Oil prices rose by almost $12 a barrel to $71.95 within 24 hours following the attack.
On his Twitter account, Trump insinuated “reason to believe that we know the culprit” behind the series of attacks on the Abqaiq facility, which is the world’s largest petroleum processing plant. “…depending on verification, but are waiting to hear from the Kingdom as to who they believe was the cause of this attack and under what terms we would proceed”, he twitted further.
The US government has produced satellite photos showing what officials said were at least 19 points of impact at the two Saudi energy facilities, including damage at the heart of the kingdom’s crucial oil processing plant at Abqaiq. Officials told US media the photos showed impacts consistent with the attacks coming from the direction of Iran or Iraq, rather than from Yemen to the south. Iraq denied that its territory was used for an attack on the kingdom. US officials said a strike from there would be a violation of Iraq’s sovereignty.
US officials said additional devices, which didn’t reach their targets, were recovered northwest of the facilities and were being jointly analysed by Saudi and American intelligence. The officials did not rule out the possibility of the weapons being fired from Yemen in a round-about path to the target.
In reaction to Trump’s comment, a senior commander from Iran’s Revolutionary Guards warned that the Islamic republic was ready for “full-fledged” war. “Everybody should know that all American bases and their aircraft carriers in a distance of up to 2,000km around Iran are within the range of our missiles,” the head of the Revolutionary Guards Corps’ Aerospace Force, Amirali Hajizadeh, was quoted as saying by the Iranian news agency, Tasmin.
Also reacting to the incident, Saudi Crown Prince, Mohammed bin Salman, said the kingdom was “willing and able” to respond to this “terrorist aggression.”
Despite claims by the Houthi rebels, Saudi officials believe Iran is responsible because the intensity of the attack is beyond the capability of the Houthi. Accordingly, they want to gather evidence before going public with the claims, according to Gulf diplomats and regional officials.
Reports indicate that Saudi Arabia’s oilfields and pipelines have been targeted by Houthi rebels in the past but never on such a scale and causing such disruption. The Iran-backed Houthi militia in neighbouring Yemen has also launched missile attacks on Saudi airports before. The success of this drone strike is a serious escalation, and one that the authorities in Riyadh are not taking lightly. Industry watchers warn that global supplies of oil are likely to suffer a “major jolt” following the attack.
Amin Nasser, Chief Executive Officer of Saudi Arabian oil company, Aramco, had initially said work was underway to restore production and that it would take weeks to return to full production capacity at the damaged facilities. However, closer examination has revealed the damage was more than anticipated and would take months to restore production capacity to normal.
Saudi Oil Attacks: Why Nigeria Should Be Alert
The recent attack on Saudi oil facilities is cause for concern to the global energy industry. While other oil producing countries take advantage of the increase in crude price occasioned by the attacks, industry analysts have called for collective and concerted efforts to prevent such attacks which can have long-term negative impacts on the global economy.
Oil prices rose above $70 per barrel following the Saudi drone strikes. But the oil producing economies could not make much capital of the incident as Saudi’s principal ally, the United States made to balance the global shortfalls from its own reserves.
Nigeria, Africa’s leading oil producer has often experienced shocks occasioned by attacks on oil installations in the Niger Delta. In the follow up to the 2015 general elections outcome, a hitherto unknown militia group called the Niger Delta Avengers blew up oil facilities in the region, bringing down Nigeria’s production quota to about 1.7 million barrels per day. Nigeria dropped below Angola on the continent in its oil production output.
Also with the unraveling of Libya, North Africa’s oil producing giant and the free flow of weapons to the hands of terror groups in sub-Saharan Africa, the possibility of the Saudi incident happening in other places cannot be ruled out. With experiences in Syria, Iraq and Libya, the Islamic State in Iraq and Syria (ISIS), has mutated in West Africa and now has an affiliate in Boko Haram which operates in the Lake Chad region spanning Nigeria, Chad, Cameroun and Niger.
It is on record that ISIS attacked and seized several oil production facilities from which they earned substantial revenues to finance their operations.
Internal security challenges which include oil theft, pipeline vandalism and militancy in the oil regions of Nigeria have been major challenges confronting the government. Oil theft is said to account for 10 percent of oil losses. This portends that Nigeria’s capacity to take advantage of the Saudi misfortune or any major conflict in the Gulf region is severely limited.
Incidents such as the Saudi attacks have further exposed the frightening dimension in the global trend of violence and terrorism. State and non-state actors may resolve to strike at economic targets to settle scores and register their grievances against opponents and/or enemies.
A recent meeting of the security chiefs wherein President Muhammadu Buhari gave them marching orders to end banditry, insurgency and other multiplying criminal tendencies was held behind closed doors. There is therefore no information whether it featured concerns about the oil industry attacks in Saudi Arabia. However, analysts are of the opinion that an oversight is costly, given the economic importance of oil to the nation’s economy.
Oil is the livewire to global economic activities. Therefore, attacks on oil facilities especially across borders must be guarded against. If the Saudi incident is not addressed frontally to prevent future occurrence not just in Saudi Arabia but other oil producing countries, then the world may be in for a bigger shock yet.
Nigeria’s four refineries situated in Port Harcourt, Eleme, Warri and Kaduna may not be fully functional, but they are important state assets that require protection against terrorism and criminal violence. The Abqaiq facility is not a refinery or a petrochemicals plant, but a crude separating facility where impurities like hydrogen sulphide are removed from the crude prior to export.
With hindsight, the escalation of restiveness in the Niger Delta and violent attacks by militants on oil installations caused several shutdowns and losses amounting to billions of dollars in oil revenues. Some international oil companies in the region shutdown or withdrew their staff for safety concerns.
Although the level of violent agitation has substantially reduced, it is imperative to guard against surprises and to proactively prepare for eventualities as global trends in terrorism render conventional security measures obsolete.
Long standing grievances such as environmental destruction, lack of development and infrastructure in the oil producing communities, a perceived inadequate share allocation from oil revenues, among others are widespread and still simmering in the region. The government needs to work towards addressing these causes of resentment in order to secure the confidence of the Niger Delta people against disruption in oil production and as well to successfully keep out the influence of groups such as Boko Haram and the Islamic State of West Africa.