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Fear Enters the Pipeline of Saudi Oil Industry

June 05, 2004|Megan K. Stack | Times Staff Writer

DHAHRAN, Saudi Arabia — In the desert washes where Americans first found this kingdom's black gold, Saudis scrambled this week to harden their defenses. New security checkpoints cropped up at the edge of the vast tangles of steel in the oil fields. Makeshift sniper nests appeared around town. A Saudi magnate logged on to an Israeli settler website for a few tips on home fortification.

Last weekend's carnage by suspected Islamic militants in the nearby petrochemical hub of Khobar drove the price of oil to a new high and laid bare an uncomfortable truth: The world oil market depends heavily on a calm that seems to be vanishing in this volatile desert kingdom.

Many people here believe that after years of threats, a struggle aimed at wrecking Saudi Arabia's storied oil industry has begun. The nature of the violence has morphed; suicide bombings at housing compounds in Riyadh gave way to two major shooting rampages at oil companies last month. Workers are no longer rattled or nervous -- they are scared.

Saudi stability once seemed a relatively safe bet; now analysts are questioning the security of the kingdom's oil facilities and the tight grip of its ruling family.

After gunmen killed 22 people last weekend, then vanished into a neighborhood swarming with Saudi commandos, official explanations were tinged with inconsistencies and marked by inexplicable security lapses.

"Every society secretes its evil. We have our share, and you have your share," Abdallah S. Jumah, president of government-owned oil company Saudi Aramco, said in an interview here. "This is our share."

"The other day shouldn't have been allowed to happen, because they knew it was coming," said Tracy Thompson, a 43-year-old substitute teacher married to an Aramco employee. "And even if they catch these [gunmen], so what? There's another 200. It's very frustrating because we know there could be sympathizers living next door."

Tight Security

Saudi officials scornfully dismiss the suggestion that terrorism could block the flow of oil. It's one thing to blow up a housing compound or open fire at a lightly guarded firm, they say, but quite another to obliterate a facility that pumps, transports or loads oil. The latter, they insist, is virtually impossible.

Wrapped in layers of fencing, barbed wire and hydraulic barriers, watched with cameras and night-vision goggles, Aramco's oil facilities are monitored by more than 5,000 guards. Backed by Saudi troops, armed guards patrol on foot, in cars and in the sky.

"You'd need a nuclear power," said Ibrahim Muhanna, advisor to the petroleum and mineral resources minister. "To damage the biggest oil facilities you'd need to come from the sea, like only the U.S. is capable of."

But even if the kingdom's heavily fortified network of pumping stations and ports prove immune to assault, there is a soft spot: The workers. About 6 million foreign engineers, software experts, schoolteachers and cooks live in Saudi Arabia, and they keep the oil business humming.

Now foreigners are barricaded in gated communities, terrified to venture outside. Some are abandoning Saudi Arabia altogether. Workers at Aramco estimate that dozens of employees have resigned since last weekend.

Nervous workers are urging their spouses and children to leave the country for the summer, or longer. Many are quietly looking for new jobs, hoping to line up a financial escape route.

Saudi Arabia has larger proven oil reserves than any other nation and has long served as a sort of relief valve for the global market: In a pinch, Saudis can easily pump extra crude, which tends to drive down prices and calm markets.

Already the top oil exporter, the kingdom could pump still more. It is producing 9.1 million barrels a day but has the capacity for 10.5 million barrels, Muhanna said.

The kingdom has responded to many a global crisis by increasing production -- during World War II, the Korean War, the Iranian oil cutoff, the Iranian revolution and the 1991 Persian Gulf War. On Thursday, OPEC agreed to raise production yet again after prodding by an insistent Saudi Arabia.

But terrorism has its price, and in the case of oil, it's not a small one. Analysts say fear alone fattens the price of a barrel of oil by $4 to $10. Even before last weekend's attacks, the suspicion that Saudi Arabia might not be able to protect its oil from sabotage was driving prices to new heights. This week, the price peaked at a record $42 a barrel.

Saudi Arabia takes seriously its position as the world's biggest exporter of crude -- and even more seriously the petrodollars that helped reinvent this hardscrabble desert country into a gleaming and sophisticated kingdom in just a few decades.

"People come here from Harvard with their funny views, but they don't live here and they don't understand how things work," said Hassan Husseini, a former Aramco planning consultant. "This oil is not just oil. It's our water, it's our farming and it's our hospitals."

Two Scenarios

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