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Middle East tensions could reduce regional gas investments

24 June 2025

Commentary
Wil Crisp
Oil & gas reporter

 

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The recent escalation in violence in the Middle East, which has included missile strikes in Iran, Qatar and Israel, is likely to have a long-term impact on investment by international oil companies (IOCs) in gas infrastructure in the region.

State-owned national oil companies in the region have set out plans for aggressive expansion, driven partly by strategies focused on diversifying their energy sectors.

International oil and gas companies are likely to show reduced enthusiasm for partnering on future projects in the region after the latest spike in violence in the Middle East.

Amid the heightened tensions, senior executives from major oil and gas companies, such as France’s TotalEnergies and US-based Woodside Energy, have highlighted how important it is for them to not be reliant on gas supplies from the Middle East region.

Speaking at the Japan Energy Summit in Tokyo on 18 June, prior to the strikes by the US in Iran and Iran’s attack on Qatar, Patrick Pouyanne, the chairman and chief executive of TotalEnergies, said that geographical diversification is key to his strategy for maintaining reliable supplies of gas to the company’s customers.

He said: “The only answer is … to diversify your source of energy … produce LNG (liquefied natural gas) in different countries. Not only in the Middle East.”

Other executives have commented on their concerns over increased risks to shipping in the Strait of Hormuz, a key route for Middle Eastern oil and gas exports.

The coast of Iran makes up the northern border of the narrow passage, while the coasts of Oman and the UAE make up the southern border.

Most oil and gas exports from Kuwait, Iraq, Saudi Arabia, Qatar, Iran and the UAE pass through the strait.

Speaking on 19 June, Wael Sawan, the chief executive of Shell, said that any blockage in the Strait of Hormuz that impacted shipping through the route would have a “huge impact on global trade”.

He also said that Shell “has plans” if the security situation deteriorates in the Middle East, but did not give details of what those plans were.

Speaking on 18 June, Meg O'Neill, the chief executive of Woodside, said: “We’re all watching very closely to understand what does this mean for customers around the world, particularly the 20% or so of global oil and LNG that transits through the Strait of Hormuz.”

Even if there is a de-escalation in tensions in the Middle East in the coming days, it is likely that the latest flare-up will have a long-term impact on sentiment among IOCs when it comes to the Middle East.

The shock of the latest escalation in violence has highlighted how fragile the security situation is in the region, and how easily this can disrupt operations in the energy sector.

While Iraq has so far not been directly impacted by missiles during this latest conflict, its oil and gas sector has been affected, with staff from several oil and gas fields being evacuated.

Italian oil and gas company Eni has reduced staffing levels at the Zubair oil and gas field in Iraq as a precautionary move, according to a spokesperson for the company.

UK-based BP and TotalEnergies have also begun evacuating foreign personnel from Iraqi oil fields where they operate, state-run Basra Oil Company said on 24 June.

While the cheaply extracted hydrocarbons reserves of the Middle East are likely to remain appealing to IOCs, the latest experience of heightened security risks and disruptions will not be forgotten quickly.

IOCs are likely to demand a higher premium to invest in new projects in the region, and projects that can produce LNG in other regions that do not have the same security problems could seem more appealing as a way to secure reliable gas supplies.

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Wil Crisp

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