How the big oil and gas CEOs think the Iran war supply disruption will play out
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Energy Secretary Chris Wright told CNBC the market is facing a “short-term period of disruption.” The price is worth paying in order to acheive the long-term benefits of defanging Iran, he said.
But the price is very high for an oil and gas industry whose assets are now exposed to attack. Conoco is “pleading” with Trump administration for military “protection around the US-owned assets in Qatar and hundreds of millions of dollars of investment,” Lance said.
Iran has forced the closure of the world’s largest liquefied natural gas hub in Qatar with drone attacks. Conoco is a major investor in that facility.
“We’ve had to evacuate a number of our staff, our non-essential staff,” Lance said. “That’s been a been a chore over the last couple of weeks.”
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“There are very real, physical manifestations of the closure of the Strait of Hormuz that are working their way around the world and through the system that I don’t think are fully priced into the futures curves on oil,” Wirth said.
It will take three to four months for Gulf Arab countries to fully restore production because they have had to close down oil wells due to the Strait’s closure, Kuwait Petroleum CEO al-Sabah said.
The oil price “floor probably has to rise,” said Conoco’s Lance, indicating that prices are unlikely to fall to pre-war levels anytime soon despite the Trump administration’s reassurances.
Cheniere, one of the world’s largest LNG exporters, is doing its best to meet demand from Asian countries that are heavily dependent on natural gas imports from Qatar, CEO Jack Fusco said. But the company is already running at peak production, Fusco said.
“We’re going to try to get as many molecules as we can to those countries in Asia that really need it,” the CEO said. “But it’s a 28-day journey from the Gulf Coast to anywhere in Asia, so it’s not going to happen overnight.”
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Iran is waging total war while the U.S. is conducting a limited campaign from the air, said Gen. Jim Mattis, Trump’s defense secretary during his first term. The goal of regime change in Tehran is delusional, he said. The conflict is at a stalemate with one side now likely to escalate further, Mattis said.
The U.S. Navy will struggle to protect the shipping lanes from the Persian Gulf through the Strait of Hormuz and out into the Gulf of Oman, he said. The Iranians have hundreds of miles of sea lanes they can attack and the U.S. would need to protect, he said.
The war could break the economic model developed by the Gulf Arab nations. Iraq, Qatar, the United Arab Emirates and potentially Saudi Arabia could see a 30% drop in their annualized gross domestic product, Sankey said.
The U.S. did not consult its Gulf Arab allies before going to war and Trump will be unable to just declare victory and walk away, Mattis said. The Iranians have a vote on when the war ends, he said.
“I don’t think we can just walk away from it,” Mattis said. “We’re in a tough spot.”