How security became the highest priority for Saudi Aramco

MEED    30 September 2019 (Last Updated October 3rd, 2019 15:50)

The Saudi energy giant is evaluating strategies to strengthen its security apparatus following the latest attacks on its facilities earlier this month.

How security became the highest priority for Saudi Aramco

As the state-owned Saudi Aramco works to restore oil production capacity from its major oil processing plants at Abqaiq and Khurais in the Eastern Province, the company is considering unprecedented security measures to safeguard its operations from hostile incidents.

The state energy giant lost 5.7 million barrels a day (b/d) of production, more than half of its crude output, in the 14 September pre-dawn assault on the two crude processing plants.

Global benchmark Brent crude surged by almost 19 per cent on 16 September to $71.95 a barrel, before paring gains later in the day and during the ensuing week, as a result of almost 5 per cent of the world’s oil supply being taken off the global grid due to the offensive.

The regional geopolitical situation is extremely tense as Saudi Arabia, along with support from the US and other allies, investigates the twin attacks and prepares to take punitive actions against the perpetrators.

Aramco too is said to be evaluating strategies to strengthen its security apparatus and improve its emergency response mechanism, in the aftermath of the drone attacks on its facilities.

“The political situation in Saudi Arabia is a bit worrying, but certainly under control. Aramco is doing all they can to mitigate the impact of the attacks and resume [full] production [from the Abqaiq and Khurais units] as fast as possible,” one source said.

“Aramco is taking steps to strengthen its security systems across the board to protect its infrastructure and projects. They will have to account for the security of [upcoming and planned] projects as those are central to the country’s future.”

Security reviews

Saudi Arabia’s recently appointed Energy Minister Prince Abdulaziz bin Salman chaired a meeting with Saudi Aramco’s senior management at the company’s headquarters in Dhahran on 16 September to take stock of the firm’s operations.

Another Saudi-based industry professional said Aramco is holding similar meetings internally and with its project consultants and contractors to address the production loss, as well as to examine ways of bolstering security.

“[There are] lots of security review meetings going on lately within Aramco and between the client and engineers, contractors and project managers,” the second source said. “Lots of discussions are going on at the Aramco chambers. The company is making sure all stakeholders and service providers are on board as it navigates the turmoil and builds on its security capabilities.”

Eastern hub

A geopolitical reality Aramco has to contend with is the concentration of Saudi Arabia’s hydrocarbon resources in the Eastern Province, resulting in an overwhelming majority of oil and gas infrastructure and projects clustered in a single zone. “Moving projects is neither feasible nor possible,” the second source said. “The Eastern Province is where Saudi Arabia has most of the oil and gas fields, so shifting projects and assets away from the base does not work.”

The majority of Aramco’s oil production comes from offshore fields in Gulf waters, which lie within striking range of Iran – now implicated in the drone assaults on 14 September. Besides, a significant chunk of Aramco’s capital expenditure budget is allocated to increasing, maintaining and debottlenecking hydrocarbon production capability of offshore assets.

“Aramco is committed to its offshore development plans, so I don’t see the offshore sector being impacted by this situation in any manner. Plus I don’t see them scaling back their offshore investments either,” the first source said.

Moreover, the Yemen-based Houthi rebel group, which has claimed responsibility for the Abqaiq and Khurais attacks, has in the past targeted Aramco’s assets in other parts of the kingdom using drones laden with explosives. The most notable Houthi attack on Aramco’s oil network was on the East-West crude transport pipeline on 14 May, which struck two pumping stations near Yanbu, causing supply disruption.

“Hostile elements can strike anywhere in the kingdom, so what sense does it make to relocate assets and projects,” the second source added. “Besides, cyber warfare is replacing conventional strikes so no project site is beyond reach.”

Aramco hosted a press conference on 17 September, during which it was announced that the state energy giant was able to restore full output capacity at the Khurais plant within 24 hours of the assault. During the media event, CEO Nasser said production at the Abqaiq plant was 2 million b/d, with the unit’s entire production capacity set to be restored by September-end.

“Not a single shipment to an international customer has been or will be missed or cancelled as a result of these attacks. We have proven that we are operationally resilient and have confirmed our reputation as the world’s leading supplier,” CEO Amin Nasser said.

Repair works

With regards to executing repair works at Abqaiq and Khurais, Aramco is understood to have engaged engineering firms, project consultants and contractors. Most service providers who have a long-standing relationship with Aramco have also offered assistance.

“We have offered Aramco all the help we can. We are supporting them as they work round the clock to navigate through the crisis,” a source working for an EPC contracting firm said.

“People have been called back from vacation. If required, project teams will be mobilised to halt work at their respective sites and relocate to the client’s affected locations to help out.”

According to a media report, Aramco has formally sought contractors to assess the damage at the two oil plants and conduct repair jobs. Commenting on the nature of such a contract, the source said: “The client would not go about the formal tendering process for these repair works, but will call upon its trusted service providers to do the work for them. Upon completion of the job, the contractor/consultant will be asked to claim the costs which the client would settle.”

Business as usual

Meanwhile, Saudi energy industry professionals say it is “business as usual” in the projects market, with consultants and contractors going about their work in a normal way.

A third source said: “Our work on Aramco projects is going on smoothly. We are receiving project memos and correspondence from the client as we normally would.”

While Aramco’s contracts with its service providers stipulate clauses of suspension of work in extraordinary or untoward circumstances, the situation at project locations does not in any way necessitate contractors to “raise red flags with the client [Aramco]”, according to a fourth source.

Regarding the outlook for the Saudi hydrocarbons projects market, the second source said: “Aramco has got very bullish plans [for projects]. They are going to come out of this [attack aftermath] bigger and stronger.”

MEED
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