Iran War causes major disruptions in oil and gas

U.S. and Israeli war against Iran, and the attacks of Iran on Gulf neighbours has caused oil and natural gas production to stop in the Middle East.

The Strait of Hormuz is the world's most important oil artery. It handles 20 percent of the global oil and LNG supplies.

Saudi Aramco, world's largest oil exporter, warned on Tuesday of "catastrophic" consequences for the global oil market if the Strait does not open.

Here are the major energy disruptions so far:

Production Shutdowns

Saudi Arabia's oil production has been cut only slightly, to 9.8 million bpd so far from its OPEC quota at 10.1 million bpd according to Energy Aspects. In February, the country produced approximately 10.9 million barrels per day to increase exports and prepare for potential supply disruptions.

Two sources reported on Monday that Aramco had begun reducing output at two oilfields. Saudi Arabia produced approximately 10.3 million barrels of crude oil per day in February.

Saudi Arabia halted production at its 550,000 bpd Ras Tanura Refinery last week and began redirecting crude oil loadings from eastern port to Yanbu, on the Red Sea. On March 4, the?refinery suffered another strike.

According to Energy Aspects, the Middle East crude production has decreased by 4.9 million barrels a day (bpd), including 2.4 million in Iraq, 0.7 million in Kuwait and 0.6 in the UAE.

A drone strike in the UAE has caused an explosion at Abu Dhabi's state-owned oil company ADNOC, which produces 922,000 barrels per day of crude oil. A source familiar with the situation confirmed this on Tuesday. Fire also broke out in the UAE's Fujairah Port, which is a major global hub for oil storage and bunkering.

Kuwait Petroleum Corporation declared force majeure and began cutting oil production on 7 March.

Iraq: Sources reported on March 8 that oil production in Iraq's southern main oilfields had fallen 70%, to just 1.3m barrels per day from 4.3m.

In addition, several companies in Iraqi Kurdistan have halted production. In February, the region exported 200,000 barrels per day (bpd) via pipeline to Turkey.

QatarEnergy has halted its LNG operations. On March 2, Qatar ceased all LNG production at some of the largest LNG plants in the world, a source of about 20% of LNG worldwide. QatarEnergy suspended some downstream production a day after. On March 4, it declared force majeure for LNG shipments.

Bahrain: Bapco Energies declared Monday force majeure for its group's operations after an attack on the Sitra refinery that buys mainly Saudi crude and processes 380,000 barrels of oil per day.

Israel has also reduced some of its oil production.

The extent of the damage caused by Israeli airstrikes in Iran is not known.

Shipping

Strait of Hormuz - Traffic through the Strait has been largely shut for a tenth day. Ten ships were attacked and only a few tankers made it through the Strait.

Iran closed the Strait on 2 March and warned any ships trying to pass that they would be fired upon.

- Major marine insurers cancel war?risk coverage: They are cancelling the coverage of vessels operating in Iranian waters, Gulf waters and adjacent water.

U.S. provides assurances: Donald Trump stated that the U.S. Navy can escort oil tankers through the Strait. He also directed the U.S. International Development Finance Corporation (IDFC) to provide financial guarantees and political risk insurance for Gulf shipping. However, shipowners and analysts are skeptical this will be sufficient.

Impact on Consumers

As the war has disrupted supplies of feedstocks, including naphtha used in steam crackers, many Asian refineries have reduced production or declared "force majeure".

South Korea will cap the price of domestic fuel to prevent price spikes, and to discourage panic purchases.

Vietnam intends to eliminate import tariffs on gasoline until the end of April in order to ensure a sufficient supply.

To conserve electricity, Bangladesh is closing 'all public and private Universities from Monday onwards and bringing forward the Eid al-Fitr holiday.

Officials said that the G7 energy minsters would discuss on a Tuesday call how to combat the soaring prices of energy due to the war with Iran, and a group European Union leaders would do the same later in the day. G7 countries are not releasing their strategic oil stocks to reduce prices.

(source: Reuters)