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Daniel J. Graeber

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Daniel Graeber is a writer and political analyst based in Michigan. His work on matters related to the geopolitical aspects of the global energy sector,…

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A Chink in Riyadh's Armor?

State-owned Saudi Arabian Oil Co. reported its hydrocarbon exploration and production systems were unaffected by a computer attack last month. A computer hacking team claimed responsibility for infecting 30,000 computers at the oil company using the Shamoon computer virus. The attack was said to be the largest infection of a single computer ever. This week, meanwhile, Citigroup said that if economic trends in the kingdom continue, Saudi Arabia could become a net importer of crude oil by 2030. While there's nothing in either report to signal the immediate end of an era, taken together, it may signal a sea change in the structure of the global petroleum hierarchy.

A group calling itself The Cutting Sword of Justice took responsibility for an attack targeting what Saudi Aramco said was the company's personal workstations. Those familiar with the internal investigation suggest the attack may have been the work of insiders who had high-level access to the company's networks. Hackers said they were able to gain access to sensitive information and threatened to release files in response to "crimes and atrocities" committed by the Saudi government.

Riyadh has been relatively isolated from regional events unravelling in the Middle East. Its critics, however, lashed out for its role in internal divisions in Bahrain and elsewhere.

Real gross domestic product in Saudi Arabia is expected to slow to around 5 percent for 2012, compared to 6.8 percent in 2011. Oil revenues, however, increased by nearly 38 percent when compared with last year because of rising production costs and higher oil prices. Nevertheless, crude oil production declines from Angola, Iran, Libya and Saudi Arabia led to an overall decrease in production from OPEC members of 160,000 barrels per day in July when compared with the previous month.

The economy of Saudi Arabia depends heavily on oil, with revenues generated from exports accounting for more than 40 percent of the country's GDP. The country is ramping up its plans to develop nuclear and solar power in an effort to reserve crude oil supplies for exports and Riyadh already uses all of the natural gas it produces domestically. A research note from Citigroup, meanwhile, said the country might become an oil importer within the next 20 years.

"If Saudi Arabian oil consumption grows in line with peak power demand, the country could be a net oil importer by 2030," the note states.

Meanwhile, oil developers working in the lucrative Bakken crude oil play in the northern U.S. Plains said they were looking to rail to get petroleum products out of the region.  BNSF Railway, the second-largest freight railroad network in the United States, said it increased its capacity this year to allow for the delivery of 1 million barrels of oil per day from the region.  The company's chief marketing officer, John Lanigan, said the regional oil sector has developed "so quickly" that there isn’t enough pipeline capacity to get crude out to refineries.

Of the top 10 oil producing countries in the world, only three come from the Middle East. Countries like Canada, Brazil, Mexico and the United States are sitting alongside powerhouses like Saudi Arabia and Kuwait. The recent cyber-attack on Saudi Aramco didn't hurt oil production, but it did expose vulnerabilities. That, and the recent Citibank note, suggests fundamental shifts are underway in the international oil market.

By. Daniel J. Graeber of Oilprice.com


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