Read this and know that it affects Nat Gas in a good way for producers:
Attacks in Mideast Raise Fear of More at Oil Installations
By SUSAN SACHS
New York Times
May 08, 2004
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DHAHRAN, Saudi Arabia, May 7 - With oil prices climbing to a 13-year high after two deadly attacks on oil installations within a week, security has become the central preoccupation of Mideast oil producers.
The killing last Saturday of five Western contractors at Saudi Arabia's western oil hub in Yanbu and the attempted suicide bombing of Iraq's main oil export terminals on April 24 have raised market-rattling fears that oil workers and facilities may be Al Qaeda's new targets of choice.
The price of crude oil jumped above $40 a barrel in New York on Friday, its highest level since Iraq invaded Kuwait in 1990. It eventually settled at $39.93, up 56 cents from Thursday's price. For months, high demand and tight supplies have pushed the price of oil upward.
Most countries are producing at or near maximum capacity, and the only country with spare capacity is Saudi Arabia. Iraq's barrels are also badly needed. While last week's attacks did not do great damage, traders worry that a more serious disruption of Middle East oil production remains possible and that it would shake the fragile stability of the already strained oil market.
"It's the combination of fears of what might happen and the fundamental tightness of the market that has sent prices higher," said Leonidas P. Drollas, chief economist with the Center for Global Energy Studies, a London consulting firm.
Saudi refineries, pipelines and ports in Eastern Province, home to Saudi Aramco, the world's biggest oil producer, are widely seen as relatively well-fortified targets.
But the incidents at Yanbu, where oil is exported to North America and Europe, and at Iraq's only gulf outlet, exposed vulnerabilities that require swift remedies, analysts and oil industry executives said.
"What you really have in these two incidents is a new phase, a new type of attack," said Walid Khaduri, editor of The Middle East Economic Survey, based in Cyprus. "And the common denominator in both is a lack of security. So the only thing that countries can do is more and more security."
In Yanbu, guards had been posted at the entrances to the sprawling residential area for foreign workers and at the adjacent petrochemical industry complex. But they were armed, if at all, with handguns, according to contractors at the site.
Their pistols were no match for the heavy weapons used by the Saudi gunmen who killed the employees of the Texas-based ABB Lummis. They had semiautomatic rifles and went on a rampage in a stolen truck through the neighborhood, dragging the body of one victim. After they were cornered and killed, witnesses said one attacker was wearing what appeared to be a vest rigged with explosives.
The earlier incident in the waters off Basra, in southern Iraq, involved three small boats laden with bombs. One blew up when American sailors pulled alongside for a routine check as the boat approached the Khawr al- Amaya terminal, killing three of the sailors. The attackers' other two boats were destroyed as they raced toward the Basra loading dock.
The attacks were widely attributed to Al Qaeda or independent terror groups it has inspired. Three weeks before the Iraq attack, a specific threat against oil installations was made in a statement posted on a radical Internet site that was signed by Abdulaziz al-Muqrin, the presumed Qaeda leader in Saudi Arabia.
"Strikes on oil wells and pipelines in Iraq may lead to the withdrawal of foreign companies or at least destroy the security and stability needed by them to plunder the wealth of Muslims," the posting said.
The fear of further attacks has set off a small, but possibly temporary, exodus of foreign workers. All 90 Lummis employees at Yanbu were evacuated, at their request, and other companies have offered their workers similar options.
"Our company has urged dependents to go home for now, because upgrading security here will take a month or so," said Max Wilks, an executive with Saudi Arabian Parsons Ltd., an affiliate of the Parsons Corporation of California, which has provided management services to the Yanbu project since it began in 1979.
He said a few of Parsons' 160 foreign staff members had already resigned. "All the others are either going to stay or are in the undecided mode," added Mr. Wilks, who has worked at Yanbu for more than 20 years and has decided to stay.
Some foreign oil workers are now also calling for more intensive background checks of the Saudis who work alongside them, based on the disclosure that three of the Yanbu attackers worked at Yanpet, a company inside the industrial zone.
The topic dominated a meeting between American businessmen and the American ambassador to Saudi Arabia last Sunday, said David Cantrell, president of the American Business Association here.
"Probably 30 of the 60 minutes were taken up by that subject," he added. "I said if we could just find a company to vet the Saudi employees, it would be the next big thing. At the moment there is no mechanism to do it."
But the Saudi culture, and the government's official campaign to force companies to hire locally, could risk irritating local sensitivities.
"This is still a tribal society, and it's traditional that someone is vouched for because he's a cousin or a relative," said one longtime expatriate worker here. Saudi oil ministry officials, in any case, have insisted that they scrutinize all oil sector hirings.
But other security suggestions were adopted almost immediately after the Yanbu attack.
Sandbagged checkpoints run by uniformed members of Saudi Arabia's elite National Guard were quickly set up outside hotels and housing compounds catering to foreign oil workers. Outside the Holiday Inn, which abuts a large housing compound for expatriate oil workers, a maze of concrete barriers was put up to slow approaching cars.
Armored vehicles with machine guns patrol the perimeter of the port and industrial complex, and Saudi officials have been meeting daily with Western workers.
"Our Westerners want to see more guards, armed vehicles and heavier weapons, which we didn't like to see one week ago," said Mohammed Abdulaziz al-Juwaiser, the director general of the Royal Commission in Yanbu, which administers the oil industry development zone. "They have started to ask for more forces on the ground, especially around the work area."
He said the government was ready to meet their demands, but he cautioned that no one could provide an air-tight guarantee of safety against determined killers and terrorists. "You cannot build fences and put a guard around every person," Mr. Juwaiser said. "This is a city where people come and go."
Aramco workers appeared less worried, noting that their operations have been in the line of fire for years, especially after the 1990 Iraqi invasion of Kuwait when Saddam Hussein fired Scud missiles at the kingdom. The Saudi military as well as Aramco's own 5,000-strong security force monitor the pipelines, including the strategic line of pipes that carry gas and crude oil from the wells in Eastern Province across 750 miles of desert to the plants and port at Yanbu.
But the Saudi government takes the danger of further terrorist attacks seriously and, after a long period of complacency, has been aggressively searching for Al Qaeda operatives, killing a number of suspects in recent weeks.
Their own citizens have also become victims. Last May, 35 people were killed when suicide bombers rammed into a residential compound in Riyadh that housed both foreigners and Saudis. A car bomb attack last week at a crowded police headquarters in Riyadh left 5 people dead and 145 people wounded.
AI
