Be Prepared for Saudi Delays: Rystad

Danish energy consultancy Rystad Energy warned September 18 that "it would be prudent to remain cautious about the guidance from Saudi Aramco regarding the restoration of oil production and processing."

It estimates that as much as 1.6 mn barrels/day of Arab Light and 0.35mn b/d of Arab Extra Light production will remain shut-in on average for the months of September and October, with full restoration of pre-attack processing capacity only returning near the end of the year.

Repairs to the damaged spheroids and stabilisation towers require expertise and spare parts which will take time to deliver. "Unless repairs happen much quicker than we expect, we estimate that the Abqaiq processing facility will only reach 90% capacity by mid- November. The outage would then be reduced to 0.5mn b/d for the month of November at 5.2mn b/d production. For now, we expect production to remain slightly below full capacity for December.”

In its “slow restart” case, the processing facility will reach only 45% of capacity by the end of September (versus 40% currently) and 65% by the end of October. In its “quick restart” case, the processing facility reaches 65% capacity by the end of September and 100% by the end of October.

While markets are breathing a sigh of relief and Brent futures have gone back below $64/barrel. But we caution traders about becoming too sanguine,” Rystad said. Its analysis concludes that there is a limit to the amount of lost production that Aramco can compensate for.

Earlier in the day, when asked by NGW in a conference call how confident he was that Saudi Aramco would meet its target for completing the repairs, the head of the International Energy Agency Fatih Birol had said that Saudi Aramco had an "impeccable track record" in terms of deliveries to customers and he was sure it would live up to its reputation.

He said he had seen plans showing production at 11mn b/d by the end of September and 12mn b/d by the end of November. And he welcomed alternative supply sources being brought into play, such as mothballed platforms. He also stressed how much crude was held in stocks, at home and abroad.

However, the attacks, which stopped 5.7mn b/d of output, half the Saudi total, have pointed up the vulnerability of highly sophisticated, visible and exposed equipment – and tanks containing highly flammable liquids– to airborne attacks. And this was the biggest attack ever on Middle Eastern oil facilities, according to the CEO of French major Total, Patrick Pouyanne as he expressed his extreme concern.