Shell Plc Chief Executive Officer Wael Sawan has warned that oil and liquefied natural gas (LNG) shortages, caused by the ongoing blockade of the Strait of Hormuz, are likely to continue for several months and potentially extend into 2027. He emphasized that the supply-demand balance will remain tight due to recent disruptions. Approximately 20% of the world's oil and natural gas normally transits through the Persian Gulf, but is currently unable to pass, forcing countries like Iraq, Kuwait, and Qatar to halt production and increasing competition among customers, particularly in Asia, leading to higher prices.
Sawan noted that around 900 million barrels of oil have not been produced in the last couple of months, with this deficit being covered by a drawdown of existing stocks. Global stock levels are now at "relatively low" points, prompting discussions of "demand curtailment in certain areas" and "fuel switching." He stressed that the impact is "profound" and affects both oil and LNG markets.
Adding to the pressure, Qatar's LNG export capacity has been significantly reduced, with 17% (12.8 MTPA) removed from service for an estimated three to five years following recent strikes. QatarEnergy's chief executive, Saad Al-Kaabi, estimated annual revenue losses for Qatar at $20 billion and described the damage as setting the region back by ten to twenty years. Shell, a major LNG trader, has declared force majeure on 6.8 million tonnes per annum (MTPA) of Qatari LNG cargoes it markets globally. Shell also holds a 30% stake in QatarEnergy LNG and operates the Pearl GTL complex, which saw one of its trains damaged.
In response to the volatile energy landscape, Shell recently agreed to acquire Canadian shale producer ARC Resources Ltd. for $13.6 billion. This deal, Shell's largest in over a decade, aims to support production growth through 2030 and bolster supplies for its LNG Canada facility, which exports natural gas to Asia. Sawan indicated that while the acquisition offers diversification away from the Middle East, it was not directly driven by the current conflict, as Shell had been evaluating ARC for two years prior to the war with Iran.
The energy crisis follows geopolitical tensions, including the war between the US and Iran which began in late February. The Strait of Hormuz blockade has also led Iran to export more oil than before the conflict, with approximately 2.1 million barrels per day over the past six days, primarily to China via "shadow fleet" tankers. This starkly contrasts with other Gulf Arab producers who have cut production due to the blockade and Iran's threats to disrupt shipping in the strait, which is normally responsible for about a third of global oil production.
