After Aramco Attack:

Saudi Arabia Loses $2 Billion in Oil Output

Date: 11 October 2019 - 22:08

News ID: ۷۱۵۸۱

LONDON (Dispatches) -- Saudi Arabia has lost about $2 billion in crude production in the aftermath of the attacks on its oil plants last month, according to a report by the Financial Times.
The country suffered a major setback from the attacks and Riyadh's state oil company, Saudi Aramco, sustained a production cut equivalent to 5 percent of the world's oil supply.
Saudi Arabia is the world's largest oil exporter, and has been working on an initial public offering (IPO) for Aramco, which would open the company to public investment for the first time in its history.
Saudi Crown Prince Muhammad bin Salman said ahead of the IPO that the oil giant may be worth upwards of $2 trillion, however, experts now doubt its value will reach that number.
While the kingdom has worked to restore its oil production to the levels enjoyed prior to the attacks, analysts have questioned whether the country can manage that, as well as how it might be able to prevent such attacks in the future.
The kingdom said that its oil output had fallen by about 660,000 barrels per day (bpd), but the Financial Times said the loss may to be closer to 1.3 million bpd.
The British daily earlier reported that Riyadh was "strong arming" wealthy Saudi families to buy into the IPO.
Aramco is in the final stages of preparing the IPO and could do so as early as Friday, according to the Wall Street Journal.
On Monday, international credit rating agency Fitch downgraded Saudi Aramco in a blow to the kingdom’s plans to attract foreign capital and diversify away from oil.
Fitch cut Aramco's credit rating by one notch from A+ to A, saying it "took into account rising geopolitical tensions in the region, but also the country’s continued fiscal deficit, among other factors.”
The decision came just after the agency cut down Saudi Arabia’s debt rating by a notch, citing vulnerabilities in the kingdom’s economic infrastructure.
The public offering of Aramco is the centerpiece of de facto ruler bin Salman’s plan to diversify the Saudi economy away from oil, attract foreign investments and create jobs.
The downgrade deals a blow to the company’s valuation which is important because it will determine how much money the Saudi government makes from the IPO and the size of foreign fund flows that are expected to enter the country.
The timing of the IPO has baffled many observers, coming while oil prices have fallen 30% in the past year and the aerial attack on Aramco has exposed its vulnerability to similar operations.
According to Reuters, the operation has spooked investors by exposing how ill-prepared Saudi Arabia is to protect itself despite repeated attacks on vital assets during the more than four years it has been embroiled in a conflict in neighboring Yemen.
"I think that the attacks on the Aramco facilities have surprised portfolio managers in that they show Saudi assets as being more vulnerable to attack and disruption than many had assumed,” Ross Teverson from the London-based Jupiter Asset Management said last month.