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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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Is Aramco Lying About Its Damaged Oil Infrastructure?

Repairs at the Khurais field and the Abqaiq processing facility may take several months rather than the ten weeks tops that Aramco had initially estimated, the Wall Street Journal reports, citing foreign contractors working with the Saudi state giant.

Aramco, the contractors told the WSJ, is in urgent talks with equipment manufacturers and service providers and is willing to pay premium rates for faster delivery and installation. Still, the repairs work could last months because the equipment has to yet be manufactured, delivered and installed, and this could take as long as a year, the WSJ’s Summer Said noted, quoting Saudi officials.

The report suggests initial expectations by Aramco may have been overoptimistic. As a result, we could see another spike in prices soon: the attacks on Khurais and Abqaiq took off a combined 5.7 million bpd from global oil markets.

Last week, Energy Minister Abdulaziz bin Salman tried to reassure traders as he told media more than half of the lost production had been restored. By the end of September, bin Salman said, Saudi Arabia would have 11 million bpd in production capacity and by the end of November, it would have 12 million bpd.

Yet, according to the Wall Street Journal’s sources, this is not likely to be the case as the equipment that will replace the one destroyed by the attacks would have to be made to measure, and this takes time.

Bloomberg estimated earlier this month that Saudi Arabia has about 50 million barrels of oil in storage at home plus another 80 million barrels stored abroad. This will be enough to keep its exports going at regular rates, but some expect a supply gap to open up late next month.

Uncertainty is growing as a result of conflicting reports: first media reported Saudi Arabia had asked Iraq for light crude to insulate itself from a supply gap, and then Riyadh said it had never done that. Now, the official position continues to be that repairs will take a few weeks, with the WSJ report suggesting that this might not be the case.

Prices have remained relatively indifferent to the latest updates, although both Brent and WTI were up by more than a percentage point from Friday at the time of writing.

By Irina Slav for Oilprice.com

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  • Mamdouh Salameh on September 23 2019 said:
    It will be no surprise if crude oil prices surged to $80 a barrel by end of October. There are several reasons for this projection.

    The first is that there is growing evidence that repairs to the Abqaiq processing station and the Khurais oilfield will take months rather than weeks given the considerable damage they both sustained.

    The second reason is that Saudi Aramco’s stored oil estimated at 130 million barrels (mb) of which 50 mb in storage on land and another 80 mb at ports around the world could be totally exhausted in less than one month thus seriously curtailing Saudi oil exports.

    The third reason is that the eventual depletion of Saudi stored oil would go a long way towards eliminating the bulk of the glut in the global oil market thus bolstering oil prices further. Were this to coincide with an end to the trade war between the United States and China, prices could go far above $80.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • Dan Pearson on September 23 2019 said:
    Saudi reports of minimal damage is not supported by the satellite images, and independent reports of the damage. The needed repairs will go beyond the end of September. We will not see shortages of oil until about November or December since Octobers exports are already in process.

    Once inventories are depleted, then we will see any possible deficits of crude exports. Regarding KSA and/or US retaliation strikes against Iran, I do not see that happening due to Iran's ability to strike US bases and other assets, as well as US military ships in the region. This would result in an all out war. The Iranian Shite allies are vast and they have the Middle East region covered.

    Trump knows this, thus he has his hands tied since he will not risk a war while trying to be re-elected. Iran's missile program is more complex than in the past and US & KSA missile defense systems are not able to pick up the missiles and armed drones that would be coming from multiple locations around the Middle east regions. Iran is in the lead here, and has agreements with Iraq. The Iranian backed forces want the US out of the region. I think they may get that, if not we will see a all out war which the US is not prepared for. This is way different than the Iraq War era.
  • Phil Mirzoev on September 23 2019 said:
    "Is Aramco Lying About Its Damaged Oil Infrastructure?" Aramco Lying? How could you even allow such cynical distrustful thoughts!
    In our ever-increasingly-honest world (with the main promoter of honesty being the media), there are probably only 3 entities left that just don't know what lie is:
    Vatican, US State Department (well, that includes all the security apparatus too which is just nominally separate), and.. yes Aramco - the last bastion of unadulterated pure truth.. :))))
  • Floyd Barrron on September 24 2019 said:
    I feel like the estimates to normalize the production are extremely overoptimistic. With many years of involvement in the refining industry around the Gulf Coast (Houston) area and personally working on fire repairs large and small, the assessment itself (of the Saudi situation) seemed to be publicized way too soon to be authentic. My doubt is tempered by the reality of the resources available in the local area. There are massive resources available here....both manpower and manufacturing support. I doubt that support level is so immediately available there. Many times it's over a week just to be able to gain access to burned out units so that hipshot estimates can be made. The Saudioil ministers were promising production restoration 2 or 3 days later. No, I dont think so.

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