Persian Gulf states have heightened security of pipelines and oil fields

Buffeted by repeated wars, the Persian Gulf states have long been aware of the need to protect their pipelines and oil fields, and industry experts familiar with the region say those countries, particularly Saudi Arabia, have heightened security since Sept. 11.
No system, however, is impregnable. Terrorists in a dinghy in the Persian Gulf could launch missiles at offshore rigs or Saudi fields, some of which are just a few miles inland. They could rupture a pipeline. They could attack the string of oil loading docks along the Persian Gulf, or on the Red Sea to the West, from which 500,000 to 6 mm bpd are shipped. An attack could disable an oil processing facility, which separates the hydrocarbons from other liquids, and remove 200,000 to 400,000 bpd from the market.

But while a successful attack on the Middle East's oil infrastructure could rattle the markets, most analysts say it would have little impact on global supplies. "They are likely to be nuisances rather than major disruptions because there are multiple redundancies in the system," said Lawrence J. Goldstein, president of the Petroleum Industry Research Foundation, an industry-supported group that runs a consulting business in New York.
"There are other loading, storage and shipping possibilities to get oil in and out. The real trouble would be only if countries cut off oil supplies, and that won't happen." The chances are slim -- for now. But Mr. bin Laden has long made clear that his ultimate goal, more than wreaking havoc in the West, is toppling the Saud family. And Saudi Arabia would be a crucial target for anyone seeking to cut deeply into the world oil flow. "The Saudis are the linchpin," said Ronald E. Minsk, an energy adviser to former President Bill Clinton. "It's because they have so much more oil than anybody."

Saudi Arabia exports about 8 mm bpd and is the biggest single supplier of oil to the United States, accounting for 1.7 mm bpd. The world's No. 2 exporter, Russia, which is not a member of OPEC, exports only 2.9 mm barrels. The Saudis are the only ones with enough spare oil-field capacity to call on if there is a severe disruption elsewhere. Although Saudi Arabia led the 1973 oil embargo to protest American support of Israel in the Yom Kippur War, it later stepped in to make up shortfalls of millions of bpd caused by conflicts in the Middle East, including the Iranian revolution, the Iran- Iraq war and the Persian Gulf war.
Even over the past year, as Iraq intermittently curtailed its exports of 2 mm bpd to demand changes in the United Nations sanctions against it, Saudi Arabia acted as the "swing producer," making up much of the difference.

Short of withering in the grip of a coup d'état, Saudi Arabia's oil exports could be cut if its rulers decide that they no longer can afford to support the United States-led campaign against terrorism. If the bombings kill many civilians or if the war expands quickly, the Saudis may feel that they have no choice but to veer away from the United States and reduce the flow of oil.
"The only way I see that happening is if the US would continue to pick targets that would include Middle Eastern oil-producing countries -- and how many it picked -- and if it were done in a unilateral way," said Marianne Kah, chief economist at Conoco. "But if it continues its multilateral approach, and includes friendly Arab countries, that won't happen."
Even in the case of state overthrow somewhere in the Middle East, she said, the flow of oil would be likely to continue. "Usually anyone in power wants oil revenues," she said, "though that may not be true for Osama bin Laden, who wants to live in a cave."

If oil supplies from the Middle East dwindle, the impact on the United States would not be acute shortages, at least for a few months. Less of its oil comes from the Persian Gulf now, and more from Canada, Mexico and Venezuela.
Instead, a sharp drop in oil supplies would set off a steep rise in prices. How long they stay high would depend on the length and the severity of any cuts. The United States has few options to increase supply and damp a price surge. Oil fields in the United States and most of the rest of the world are running close to full capacity, except, as luck would have it, in the Persian Gulf. New fields, regardless of the promise they hold, take several years to bring on stream.
"There is a big lag time between when you drill exploratory wells and when you get production," Ms. Kah said. Although the Bush administration and the oil industry have long pushed to open the Arctic National Wildlife Refuge to drilling, delivering oil from there would mean "expanding the oil pipeline in Alaska to handle the extra volume, and then you would be sending the oil down at the soonest in three or four years."