LONDON: The oil and liquefied natural gas shortages caused by the blockade of the Strait of Hormuz are likely to drag on for months and possibly into next year, Shell Plc CEO Wael Sawan says.
“We are talking about roughly 900 million barrels that haven’t been produced in the last couple of months and that’s been replaced essentially by stock drawdown,” said Sawan.
“We’re now starting to reach some relatively low levels. We’re talking about demand curtailment in certain areas. We’re talking about fuel switching.”
Sawan’s comments underscore the severity of the global energy shock that has followed President Donald Trump’s war with Iran, which began in late February.
About 20% of the world’s oil and natural gas is unable to pass through the Persian Gulf, forcing countries including Iraq, Kuwait and Qatar to shut down production and pushing customers – particularly in Asia – to compete for supplies elsewhere by bidding up prices.
Brent crude climbed 2.8% to US$111.19 a barrel in New York as talks between the United States and Iran showed little sign of progressing.
“This is profound, and not just for oil by the way,” Sawan said. “It also plays in, of course for liquified natural gas (LNG),” he said.
Shell agreed earlier this week to buy Canadian shale producer ARC Resources Ltd for US$13.6 billion, its biggest deal in more than a decade.
The purchase will support production growth through 2030 and help supply its LNG Canada facility, which exports natural gas to Asia.
While the acquisition provides diversification away from the Middle East, it wasn’t a key driver of the deal. Shell had been assessing ARC for two years prior to the war with Iran, Sawan said.
“Our focus has been on diversifying production but also continuing to look at new horizon,” he said. — Bloomberg
