Saudi Arabia is considered the world's lone indispensable oil supplier. But is it a reliable one?
That's what a growing number of energy industry veterans and Middle East observers are asking.
The kingdom sits atop the globe's biggest pool of oil and can outpump any other country. Over 30 years of war and political upheaval, the Saudis have prevented panic in global markets with a turn of the tap. (Related story: Oil prices fall on request for increase in OPEC quotas)
These days, other producers are pumping flat-out, so the kingdom's 2 million barrels a day of spare capacity are the only cushion for a world that burns through 80 million barrels of oil every 24 hours.
Prices have hovered near $40 a barrel following a terrorist assault that killed five foreign engineers in the Saudi oil city of Yanbu, as well as a Saudi. The incident fueled skepticism about the kingdom's reliability as a supplier, but doubts about Saudi Arabia have been growing for months. Oil industry executives and security experts want answers to three questions:
1. How safe are Saudi oil installations?
"Taking down Saudi Arabia's oil infrastructure is like spearing fish in a barrel," former CIA officer Robert Baer writes in his recent book, Sleeping with the Devil.
The Saudis have 262 billion barrels of proven reserves, 25% of the world's total. Nine percent of the petroleum consumed in the USA each day comes from Saudi Arabia, accounting for 15% of U.S. imports.
The kingdom has five giant fields that are connected by 10,500 miles of pipe, much of it above ground. A coordinated assault on five or more key junctions in the system could put the Saudis out of the oil business for two years, Baer writes.
"The choke points are too many to count," he says. His conclusion: A successful assault on the giant Ras Tanura complex "would be enough to bring the world's oil-addicted economies to their knees, America's along with them."
Abdallah Jum'ah, CEO of the normally secretive Saudi Aramco, recently went public with details of the state-owned oil company's security arrangements in an effort to reassure doubters. He said company facilities are protected by 5,000 security guards. "There is nowhere in the world that oil facilities are protected as well as in Saudi Arabia and Saudi Aramco," he said.
Nail Al-Jubeir, spokesman for the Saudi embassy in Washington, says the kingdom has spent decades beefing up security. "Our oil can come out of the (Persian) Gulf, or ... from the Red Sea. We've built in redundancies to make sure there's enough oil for the world and for our income for the future."
Those assurances do little for Matthew Simmons, a Houston-based investment banker who specializes in oil and gas ventures. He says he was alarmed by the light security at Saudi Arabia's massive Abqaiq oil processing plant.
To cripple the Saudi oil network, "All you'd need to do would be to get a big fire raging at Abqaiq," Simmons says. "It's got a chain-link fence around it. Chain-link fences aren't exactly the Maginot Line."
2. How certain is the ruling family's grip on power?
The Yanbu attack took place at a refinery co-owned by a state-run Saudi company and ExxonMobil. Various Saudi authorities have blamed al Qaeda, a Saudi fugitive who was believed to be in London, "Zionists" and other "external elements." The attack was an inside job: Three of the four militants worked in Yanbu's oil sector and used their company passes to slip into petrochemical facilities there.
Al Qaeda ? and Saudi militant groups sympathetic to it ? has targeted the kingdom's oil assets as a means of bringing down the House of Saud, which has ruled the country since the 1920s.
"Oilfields used to be beyond their agenda, but now they're including oil resources as targets, as well," says Fouad Ibrahim, editor of Saudi Affairs magazine in London. "Now, there is no place safe in Saudi Arabia."
Ibrahim and other Saudi dissidents say the attack in Yanbu proves what they've been saying for years ? that radical groups have won converts among workers at state-owned oil company Saudi Aramco and key areas of the government.
Al-Jubeir, the embassy spokesman, says Saudi security forces have extremists on the run. The proof? "They're picking softer and softer targets" farther removed from the capital of Riyadh, he says.
A bomb blast at national police headquarters last month hit a motor vehicle office, not key law enforcement facilities, Jubeir says.
Dissidents say there is little danger of a popular uprising against the Saudi rulers. But the kingdom's critics are just as emphatic that more Saudis are becoming deeply disaffected with the monarchy.
Much of the disaffection is economic. According to United Nations statistics, Saudi GDP was $15,500 per capita in 1980 ? $2,500 more than in the USA. Today, the figure is around $7,500. Forty percent of Saudis are under age 15. More than 30% of working-age adults are unemployed.
Saudi mosques have become recruiting and training grounds for the radicals, says Ali Al-Ahmed, director of the Saudi Institute, a pro-democracy group in Washington. "In the mosque on Friday, it's the same feeling you'd get in an al Qaeda camp ? the resentment, the anger."
3. Can we count on Saudi reserve estimates?
Simmons argues that the giant Saudi fields have peaked. The kingdom has only been able to maintain output by drilling new wells and using expensive technology to get at hard-to-reach oil. Aramco has inflated the kingdom's proven reserves for political reasons and overestimated what it can recover by making faulty technical assumptions, Simmons says.
Simmons' analysis shows the kingdom headed for a steep output decline. "You could say, wow, they're headed for a collapse."
That could be a rude shock for a world that is expected to slurp up 50% more oil by 2025. Even experts who don't question the Saudi figures say the kingdom must embark on a massive expansion program and find new oil if it is to satisfy demand.
Michael R. Smith, technical director at research firm EnergyFiles in London, says, "Saudi Arabia can produce much more than it is now, but it will be called upon to produce more than it can sustain."
Not everyone is convinced.
"We don't really believe Saudi reserves are exaggerated," says Manouchehr Takin, senior analyst at the Centre for Global Energy Studies in London. "But the scale of projects is huge, the requirements and cost are enormous, and the logistics are a challenge."