The Saudi Arabian Oil Co. is in emergency talks with equipment makers and service providers, offering to pay premium rates for parts and repair work as it attempts a speedy recovery from missile attacks on its largest oil-processing facilities, Saudi officials and oil contractors said.It may take many months—rather than the maximum 10 weeks company executives have promised—to restore operations to full working order, they said.
Following a devastating attack on its largest oil-processing facility more than a week ago, Aramco is asking contractors to name their price for patch-ups and restorations. In recent days, company executives have bombarded contractors, including
with phone calls, faxes and emails seeking emergency assistance, according to Saudi officials and oil-services suppliers in the kingdom. One Saudi official said costs could run in the hundreds of millions of dollars. Saudi Arabia and the world’s most profitable company are struggling to recover from the attacks, which came within weeks of the Saudi government reviving plans for its on-again, off-again initial public offering of Aramco shares. Now, the IPO, the company’s financial health and the country’s economy may be in danger, say Saudi officials and advisers. Saudi officials and Aramco executives have been consistent since the attacks, communicating statements aimed at reassuring oil markets that the state-owned company will recover quickly while continuing to supply customers as usual. On Saturday, Aramco’s Chief Executive
reiterated production would be back to its precrisis level by the end of the month. “Not a single shipment to our international customers has been missed or canceled as a result of the attacks,” he said. The company intends to return to its maximum output capacity by the end of November. Aramco already has begun shipping equipment from the U.S. and Europe to rebuild damaged facilities, said
the general manager of southern operations at Aramco. Saudi officials say there is little sense of calm at the highest levels of the company and the Saudi government, however. It could take some contractors up to a year to manufacture, deliver and install made-to-measure parts and equipment, the Saudi officials and the oil contractor said. “We are still in a frantic search for spare parts,” one Saudi official said. “It is not really as great as rosy as you may think.” Little more than a week has passed since Khurais oil field and Abqaiq, the world’s largest oil-processing facility, were struck by missiles, causing the largest single outage the oil industry has ever seen. The attack knocked out 5.7 million barrels a day of Saudi crude-oil production—about half the country’s output and nearly 6% of global supply. The Trump administration and Saudi Arabia have blamed the attack on Iran, which has said it wasn’t responsible. Across the two sites at Abqaiq and Khurais, nine oil processing units, known as stabilizers, were damaged to varying degrees, Aramco said. Eleven spherical structures that take gases out of the crude oil were hit at Abqaiq, as were another two tanks that hold water removed from the crude oil, the company said. The extent of the damage means a return to normal operations at Abqaiq could take up to eight months, said some Saudi officials. Most technical experts who have seen the destruction firsthand said they share that view. “Repairing the damaged units will take time, anywhere from two to nine months depending on the damage, even if Aramco had contingencies in place and spare tailor-made equipment,” said IHS Markit in a note. The Saudis reached out to
SPA late last week and told the Italian contractor the kingdom would pay generously for repairs, said Saudi officials and a contractor with operations in the kingdom. Saipem is considering how it might assist Aramco but with $3.5 billion worth of contracts with Aramco signed in July, it is already overstretched in Saudi Arabia, the contractor said. Saipem is “supporting [Aramco] in the assessment of damages caused by the attack” at the Khurais field, where it already has contracts, the company said in an email. Contractors can deliver many of the spare parts Aramco needs within a month or so, but only if they are rushed using air delivery at an extra cost of 50%, the contractor said. Made-to-measure turbines and compressors can typically take up to a year from the time they are ordered to be ready to install, the contractor said. Aramco also has sought the help of General Electric and is negotiating with the company to help replace damaged machinery, according to Saudi officials and a contractor familiar with the negotiations. General Electric didn’t respond to a request for comment. Meanwhile, Aramco is working hard to keep a lid on the severity of its challenges. As part of a tour for the media on Friday, the company showed reporters and television crews a stabilizer that was completely blackened and another under repair that was in a somewhat better state. Hundreds of workers in hard hats were on the Khurais site, while cranes appeared to swing into action. Aramco staffers say they were stunned when they saw the Saudi energy minister announce the company’s triumphant recovery on international television last week. “I have been honored by the king and crown prince,” he said, “to deliver the good news to citizens of this country and its supporters that oil supplies to market have returned to what they used to be.” Many Aramco executives and board members, meanwhile, are privately expressing doubt that the company can meet its target of a three-week return. They estimate the production recovery will take twice as much time, according to people in touch with them. Some “board members are horrified” that the company could communicate such optimistic assessments, said one of the people. From the moment fires from Abqaiq and Khurais began to light the Saudi sky last week, the company has been slow to come to grips with the scale of the attack and the extent of the damage, said Saudi officials. “We knew looking at the screens something very serious was going on, but we just did not know what it was,” said an Aramco official. While the strikes were under way, entire sections of a display showing Aramco’s facilities across Saudi Arabia went dark. Control-room staffers at Aramco’s headquarters in Dhahran initially logged the incident as a series of routine fires. But as firefighters tackled the blazes on the ground at the Khurais site, emergency staffers looked up and saw streaks across the sky as two more missiles whistled into the facility with a bang, said Aramco’s Mr. al-Abdulkareem. In total, four cruise missiles hit the Khurais facility on Saturday, each targeting the oil field’s 98-foot stabilization towers. Metal debris from the structures was still scattered on the ground Friday. —Sarah McFarlane contributed to this article.
Copyright ©2019 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8