Iran war will change global energy market in these ways, oil execs say

CEOs of major oil and gas companies told investors on earnings calls over the past two weeks that the world’s energy system will change dramatically as a result of the Iran war.

Iran’s blockade of the Strait of Hormuz has resulted in the loss of nearly a billion barrels of oil, and oil shortages worsen with each day the sea route remains closed.

Olivier Le Peuch, chief executive of the major oilfield services company, said the outage showed the fragility of the global energy system. SLB.

“This will lead to fundamental structural change in the energy field,” said CEO Lorenzo Simonelli. Baker HughesA rival of SLB.

Le Peuch and Simonelli said governments and industry will prioritize energy security. CEO Jeffrey Miller said it was “no longer simply a topic of conversation.” halliburtonAnother major oilfield services firm.

As a result, investment in oil exploration and production will increase, the CEOs said. Simonelli said low-carbon solutions such as geothermal, nuclear and grid modernization will continue to see investment.

“This isn’t just about increasing energy supply,” Baker Hughes CEO said. “This is about robust and resilient energy infrastructure and greater redundancy, diversification of infrastructure, reducing dependence on a single large-scale asset.”

Diversify consumables

The closure of Hormuz underlined the dependence of Asian economies, in particular, on the Middle East for imports of crude oil and liquefied natural gas.

“Obviously people will be re-evaluating their energy security and how to ensure they are not exposed to the same risk in the future.” ExxonMobil CEO Darren Woods said:

Oilfield service CEOs say governments will aim to diversify energy sources. Executives also said they would have to rebuild war-damaged oil stocks.

“Global stocks will rebuild above historic levels to ensure energy security is at the forefront,” Simonelli said.

CEO Kaes Van’t Hof said U.S. crude oil will become more important than ever in helping the world maintain energy security. Diamondback EnergyOne of the largest shale oil producers in the USA. US crude oil exports reached record levels during the war.

Miller said the oil market is now “fundamentally tighter” because of the supply disruption. He said the market has shifted from overexpectations to a large deficit this year.

Le Peuch said this would support rising oil prices after the war ended. He said higher prices would encourage investment in offshore and deepwater opportunities in Africa, the Americas and Asia.

“Africa [represents] “It is one of the most interesting long-term opportunities with a significant base of underdeveloped oil and gas resources,” said the SLB CEO. “We expect portfolio allocation to shift more favorably to this region over time.”