Iran War and High Oil Prices Drive Oil Industry to Look Beyond the Middle East

Cash Piles Up Amid Soaring Oil Prices

Exploration Expands in Africa and South America

With geopolitical risks in the Middle East on the rise, major oil companies such as ExxonMobil and Chevron are accelerating efforts to discover new oil and gas reserves outside of the Middle East, the Wall Street Journal (WSJ) reported on the 19th (local time).

ExxonMobil is currently considering investing up to 24 billion dollars in deepwater oil fields in Nigeria. Chevron is expanding its business in Venezuela. BP has acquired shares in offshore oil blocks in Namibia, while TotalEnergies has signed an exploration agreement with Turkiye.

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Due to the war involving Iran and maritime logistics bottlenecks in the Persian Gulf region, some Western oil companies have suffered billions of dollars in revenue losses. However, the WSJ noted that the surge in energy prices has enabled the oil industry to reap substantial profits, which in turn is helping oil companies re-enter regions that were previously difficult to access or where they had abandoned investments years ago. Energy research and consulting firm Wood Mackenzie estimated on the 16th that major oil companies could generate a total value of 120 billion dollars through exploration projects over the next several years.

Edward Chow, former Chevron executive and non-resident senior fellow at the Center for Strategic and International Studies (CSIS), stated, "Never underestimate that people in the exploration industry are always dreaming of new opportunities," adding, "Now, they have the capital to pursue those dreams."

On the 16th, U.S. Energy Secretary Chris Wright and Interior Secretary Doug Burgum urged executives of major oil companies to increase crude oil production in order to restrain oil prices.

Western oil companies operating in the Middle East have taken significant hits due to the war involving Iran. For example, ExxonMobil reported that its global oil and gas production dropped by 6% in the first quarter as a result of the conflict. In addition, damage to Qatar's natural gas facilities from the war is expected to lead to an annual revenue loss of about 5 billion dollars. QatarEnergy estimated that it could take up to five years to restore these facilities.

The WSJ predicted that, for the time being, the energy industry is likely to focus its attention on regions outside the Persian Gulf. Just before the outbreak of the war, Chevron entered into exclusive negotiations with Basra Oil Company in Iraq to secure a stake in West Qurna 2, one of the world's largest onshore oil fields. However, analysts believe that it is unlikely for Western oil companies to sign major deals in the Middle East until the war involving Iran is fully resolved.

Instead, in the aftermath of the war, energy companies are diversifying their asset portfolios and spreading risk worldwide. ExxonMobil, Chevron, Shell, BP, and TotalEnergies are thoroughly evaluating new drilling prospects in Africa, South America, and the Eastern Mediterranean to secure reserves for the next decade. According to Wood Mackenzie, oil-producing countries worldwide need to secure a total of 300 billion barrels of new resources by 2050 to meet demand.

ExxonMobil has recently initiated procedures for offshore drilling in Greece and has signed preliminary exploration agreements with Iraq, Turkiye, and Gabon. In Trinidad and Tobago, the company is conducting surveys for deepwater oil and gas exploration.

Chevron strengthened its exploration team last year, including the 53-billion-dollar acquisition of Hess. The company also brought in Kevin MacLachlan, formerly of TotalEnergies, as Vice President of Exploration and plans to invest 7 billion dollars in global offshore development this year. In Venezuela, Chevron has entered into an asset swap agreement to secure heavy crude oil preferred by U.S. refineries. Exploration in Egypt's Mediterranean waters is scheduled for later this year, and the company recently discovered new oil fields in the Gulf of Mexico. Earlier this year, Chevron also secured four offshore blocks near Greece and oil blocks in Libya.

Schreiner Parker, an analyst at research and consulting firm Rystad Energy, commented, "Sustained high oil prices are the best friend of oil exploration," adding, "In the mid-to-long term, a risk premium will be attached to all oil produced in the Persian Gulf, which will push companies to explore untapped regions."

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