The economic pain inflicted on Saudi Arabia by this weekend’s attacks on its largest oil processing plant, Abqaiq, is turning out to be more severe than it was initially thought. Despite its long-held position as the world’s largest exporter of oil, Riyadh has been left with no option other than to import diesel and jet fuel.
The kingdom, according to several sources, is scouring global markets to meet its energy needs, a situation that many would describe as being embarrassing for a country that has been blessed with oil.
Bloomberg reported that Aramco Trading Co., which buys and sells fuels on behalf of the state oil company, purchased diesel cargoes and also sought one-off supplies of aviation fuel this week. The Wall Street Journal said that Riyadh was reaching out to foreign producers for crude and other petroleum products to plug gaps in its own supply.
While it’s acknowledged that the kingdom does import fuel from time to time anyway, especially during the summer when air conditioning puts higher demands on the power grid, the quantities it has sought this week are said to far exceed its regular demand, according to traders cited in the report.
Preservation of crude exports, which if allowed to drop significantly could have a long-term impact on its market share, is understood to be the reason for Riyadh’s decision to seek out products including diesel, gasoline and fuel oil for domestic use.
Saudi Arabia produces nearly 12 million barrels of crude oil a day and exports the vast majority, making it the biggest source of energy in the global market. Its domestic consumption pales into insignificance in comparison to global powerhouses like the US, India, and China.
It’s feared that Saturday’s attack, on what is described as the heart of the kingdom’s oil industry, nearly halved Riyad’s capacity through the loss of 5.7 million barrels a day or the equivalent of five per cent of global supplies.
According to the WSJ the Saudis have also asked Iraq’s national oil company, the State Organisation for Marketing of Oil, for as much as 20 million barrels of crude to supply its domestic refineries.
A further problem inflicted on the kingdom is its capacity for producing the best grade of oil to its customers. To keep its customers supplied, Saudi Arabia has been forced to make adjustments to the crude grades it offers customers. WSJ reported that Aramco has told Indian refiners that it can’t deliver the premium-grade Arab Light crude they ordered.