Saudi Aramco said it’s looking at options to expand its oil export capacity as the Iran war disrupts flows through the Strait of Hormuz and Houthi rebels threaten shipments in the Red Sea.
Since the Iran war started, Hormuz disruptions have forced Aramco to divert much of its export volume to Saudi Arabia’s western port of Yanbu. Chief Executive Officer Amin Nasser said the company is looking at ways to expand its capacity, including potentially increasing the size of the east-west pipeline that’s proved a vital lifeline to both the kingdom and the oil market during the war.
“In terms of exporting our crude, we are looking at actively increasing optionality right now,” Nasser said on a call on Tuesday. “This is currently under execution.”
Nasser’s comments come after the Saudi energy giant said that attacks last month didn’t have a material impact on its operations. While the CEO said threats from Yemen’s Houthi militant group to blockade Saudi shipments in the Red Sea haven’t dented export volumes, the kingdom is working on contingency plans to keep its oil flowing.
“Our engineering team is looking at how can we not only expand what we have, but at the same time identifying other routes that we can capitalize on,” Nasser said, without giving further details of the options under consideration.
Exports to Asia via the Suez Canal and the Cape of Good Hope around Africa take 20 to 25 days longer than usual voyage times, he added.
During the second quarter, Aramco’s liquids production fell 28 percent to 7.57 million barrels a day from a year earlier. Saudi Arabia’s observed crude oil exports edged lower in July, according to tanker-tracking data compiled by Bloomberg.
Aramco acknowledged the July attacks on key infrastructure for the first time. Yemen’s Houthi rebels said they targeted Saudi oil facilities, while the kingdom also intercepted drones from Iraq, leaving traders on edge as they pored over images of what appeared to be tank fires and flaring at various sites across the kingdom.
“Certain facilities of the company were targeted and the impact was not material operationally or financially,” the CEO said. “The same thing applies for July. No material impact on our capabilities, even with the July attacks.”
Aramco didn’t didn’t provide specifics on which facilities suffered damage or were still being repaired. The company defers on security issues to the Saudi government, which reported the attacks last month.
While Nasser acknowledged there had been some interruption to operations, he said the company’s full production capacity of 12 million barrels a day remained available. Aramco could ramp up to that level within three weeks if requested by the government, he added.
Aramco said the oil market upheaval caused by the conflict is likely to spur the development of extra storage capacity around the world. The need for oil to replenish depleted stockpiles and to fill new ones is likely to support demand into next year, the CEO said.
“Everybody we’re talking to now is looking at building additional storage facilities to cater for similar disruptions in the long-term,” Nasser said.
Aramco earlier reported a 33 percent increase in second-quarter profit to $33.4 billion as it benefited from a war-driven surge in oil prices. That exceeded the combined earnings of ExxonMobil Holdings Corp. and Chevron Corp.