Al-Qaida Attacks  

Posted by Big Gav

Al Qaida is apparently claiming responsibility for a car bomb attack on Saudi Arabia's Abqaiq refinery complex. Al Qaeda (rather than local Sunni extremists) is now also being blamed for the destruction of the Askariya shrine in Iraq - which may be true, or may just be a convenient way of reducing sectarian tensions as daylight curfews start to put a lid on the resulting violence.

The Oil Drum has some pertinent quotes from various news reports on the Saudi Arabian attack.

Saudi security forces have foiled an apparent suicide car bomb attack on a major oil production facility in the eastern town of Abqaiq.

...

At least two cars carrying explosives were fired on at the plant, Saudi officials have said. BBC security correspondent Frank Gardner says the attack is the first direct assault on Saudi oil production.

Saudi Oil Minister Ali al-Nuaimi said output at the facility, which handles about two-thirds of the country's oil production, was unaffected by the attack. Oil security analysts have estimated that a serious attack on the facility could halve Saudi exports for up to a year.

...

Former Middle East CIA field officer Robert Baer has described Abqaiq as "the most vulnerable point and most spectacular target in the Saudi oil system."

Abqaiq handles crude pumped from the giant Ghawar field and ships it off to terminals Ras Tanura -- the world's biggest offshore oil loading facility -- and Juaymah.

The AP report noted:
Al-Qaida purportedly claimed responsibility for the attack, the first on an oil facility in Saudi Arabia. The assault raised speculation that the militants were adopting the tactics of insurgents across the border in Iraq, where the oil industry has been repeatedly targeted.

...

Saudi Arabia has been waging a successful three-year crackdown on al-Qaida's branch in the kingdom. Security forces have killed or captured most of the branch's known top leaders, most recently in gunbattles in December, after the militants launched a campaign in 2003 to overthrow the U.S.-allied royal family with a string of attacks.

There have long been fears militants would target oil facilities, but in the past they have targeted foreigners working in the industry rather than infrastructure. "In Iraq they zeroed in on oil, and this appears to be a creeping process, since it is happening in Saudi Arabia," said Youssef Ibrahim, a Dubai-based political risk analyst with the Strategic Energy Investment Group.

In May 2004, attackers stormed the offices of a Houston-based oil company in the western Saudi oil hub of Yanbu in fighting that killed six Westerners, a Saudi and the militants. Several weeks later, al-Qaida-linked gunmen stormed oil company compounds in Khobar, on the eastern coast, and took hostages in a siege that killed 22 people, 19 of them foreigners.

In December 2004, al-Qaida leader Osama bin Laden, a Saudi exile, for the first time called on militants to attack oil targets in the Gulf to stop the flow of oil to the West. But no major attacks followed in the region. Some experts have believed that because al-Qaida's long-term goal is to run Saudi Arabia, it would do nothing to seriously jeopardize the oil industry on which the kingdom's wealth is based.

Friday's attack is new "in the sense that this is the boldest attempt to strike at the heart of a Saudi oil-production complex," Eurasia Group oil analyst Antoine Halff said.

Saudi Arabia holds over 260 billion barrels of proven oil reserves, a quarter of the world's total. It currently puts out about 9.5 million barrels per day, or 11 percent of global consumption. The Abqaiq facility processes about 5-7 million barrels a day, removing hydrogen sulfide from crude oil to make it safe for shipping, before it is pumped to tankers for export.

Forbes has a report quoting Chinese sources that China's Guangdong province plans to build its own strategic oil reserves following severe oil shortages last year.
The Guangdong government intends to build a 10-mln-cubic-meter crude oil reserve ... It intends to build another two-million-cubic-meter reserve for oil products ... the project will begin this year and be completed by 2010.

Guangdong currently has commercial oil reserves that can only hold supplies for five to seven days, according to the paper. The state-run strategic reserve will be able to hold supplies for half a year.

China began building four strategic oil reserve bases in the eastern provinces of Zhejiang, Shandong and Liaoning more than a year ago, which will be able to hold supplies for 30 days.

The debate about whether or not the Iranian Oil Bourse will have any impact on the US dollar (or if it even exists) continues, with Jerome a Paris writing a diary that tries to debunk the whole idea on Daily Kos. I thought some of his points were wrong, but I guess you could make a case that the possible impact of it is something of an urban legend - time will tell. Some of the comments are worth considering as there is quite a lot of argument about the topic going on.

Jeff Vail isn't sure the bourse will open in March either, but does have an interesting post on petro-dollar recycling and the flap over the UAE buying US ports (all those excess dollars have to go somewhere, and for those who have had their fill of US treasuries, actual US assets are a tempting alternative - when there isn';t too muh political interference).

The Japanese are looking at returning to oil fired power generation during the (northern) summer peak season due to soaring LNG prices.

The British are worrying about gas shortages right now, with forecasts of cold weather in the coming weeks resulting in predictions of power cuts.
Faced with gas price rises of up to 22% and average annual fuel bills climbing to more than £1,000 a year, UK householders might well be wondering when the increases are going to stop. At the current rate, average annual bills would top £2,000 by 2007.

In fact, a recent publication suggests prices may well fall beyond 2007. Energy prices, as with other commodities, revolve around supply and demand. Right now we are in the worst possible place, with supply only just meeting demand amid fears that a bout of bad weather in the next few weeks could lead to an energy deficit of up to 15%.

2 comments

There is another potential oil crisis and it may be coming from Venezuela.

Venezuela’s man in Washington, Bernardo Álvarez, just hinted that oil supplies to the US could be halted. This threat has become a theme of Venezuela’s diplomacy.

Is it possible? Can Venezuela cut oil supplies to the US?

Only if President Chavez is willing to take an economic shock.

During his congressional hearings, Thomas Shannon, US Undersecretary of State for Hemispheric Affairs, clearly articulated the dilemma :

"Venezuela in reality does not sell petroleum to the USA ... it sells it to itself."

Citgo, A Venezuelan oil company, buys Venezuelan oil to refine in US based Venezuela’s refineries. Then it sells the gas in Venezuelan Citgo gas stations. We are talking of roughly 1.4m barrels per day and close to 60% of Venezuela’s oil exports.

Chavez is a big gambler. He already survived a more difficult crisis, one that involved an internal enemy and a national strike. An external enemy, he may think, would join the country.

"An external enemy, he may think, would join the country."

Well - he isn't the only "leader" on the planet to be playing that game - its probably easier to finds one who aren't at the moment.

As for the Citgo and Venezuelan supply issue, I figure as long as oil remains fungible who Venezuela "sells" its oil to is kind of academic - at the end of the day those who want oil will get as much as they can afford to pay for, so its largely just a propaganda play at this point.

In the advent of a post-peak, carefully controlled global oil market the rules will change of course...

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