Iran War Deemed to Transform Global Energy System, Oil and Gas Industry Prepares for New Era

The Iran war and the closure of the Strait of Hormuz are assessed to drastically alter the global energy system. This view was expressed by several heads of global oil and gas companies in their financial reports over the past two weeks. The closure of the Strait of Hormuz has severely disrupted global energy distribution. This strategic sea route has long been one of the main pathways for shipping the world’s oil and gas. Due to the blockade, the global oil supply is said to have lost nearly one billion barrels. The supply shortage is estimated to continue growing as long as the route remains fully closed. The Chief Executive of SLB, the world’s largest oilfield services company, Olivier Le Peuch, stated that the crisis highlights the fragility of the global energy supply chain. “This will drive fundamental structural changes across the entire energy landscape,” said CEO of Baker Hughes, Lorenzo Simonelli, SLB’s main competitor. According to energy industry executives, governments will now focus more on energy security issues. “It’s no longer just talk,” said CEO of Halliburton, Jeffrey Miller. Energy services companies predict that investments in oil exploration and production will increase following the war. Investments in low-carbon energy such as geothermal, nuclear energy, and the modernisation of electricity grids are also forecasted to continue rising. “This is not just about increasing energy supply,” said Simonelli. “It’s about robust and resilient energy infrastructure, greater redundancy, infrastructure diversification, and reducing dependence on a single large-scale asset,” he continued. CEO of Exxon Mobil, Darren Woods, stated that many countries are now reevaluating their energy security strategies. “Clearly, people will reassess their energy security and how they ensure that, going forward, they do not have the same exposure,” Woods said. Governments are expected to accelerate the diversification of energy sources while expanding national oil reserves. Strategic energy reserves in many countries are known to have been depleted during the war. “There will be an increase in global stockpiles above historical levels to ensure energy security becomes the top priority,” said Simonelli.