Edinburgh, Scotland-based global energy and natural resources analytics, insights and proprietary data company Wood Mackenzie has warned that it would be months, after a ceasefire was achieved in the Iran war, before the Middle East oil and gas sector could achieve full recovery. Currently, 11-million bbl/d of oil and gas production is “shut-in” across the region.

The key issue is the restoration of safe and secure transit of the Strait of Hormuz, at the entrance to the Persian Gulf. Tankers had every reason to sail through the strait, as soon as security and the maritime insurers allowed, pointed out the company. But it was currently uncertain how many safe transits could be undertaken each day.

“A ‘workable system’ of transit and shipowner confidence in the security of the transiting vessels is essential,” highlighted Wood Mackenzie senior VP refining, chemicals and oil markets Alan Gelder. “This includes availability of insurance for transiting vessels, facilitating commercial trade financing, sustained outbound vessel transits through the Strait of Hormuz making current oil-on-water available to the global refining market, and sustained in-bound vessel transits through the Strait making ballasted vessels available to load crude at Gulf load ports. There also needs to be confidence in viability of transit during and beyond the current two-week ceasefire.”

There were also upstream issues, in the oil and gas fields and the refineries. Regarding oil, the big regional producers, Saudi Arabia and the United Arab Emirates (UAE), each had storage capacity amounting to about a month. (At the other extreme, Iraq and Kuwait each had a storage capacity of about two weeks.) Once exports resumed, upstream production and refining could restart.

More than 50% of the region’s output could be restored even before shipping returned to normal. But, thereafter, recovery would vary from country to country, due to the specific complexities of their oil fields, including resource constraints and reservoir management requirements. Iraq, for example, could take from six to nine months to return to its pre-war production levels. Pushing too hard to accelerate production recovery could risk long-term damage to the oil fields, warned the company.

Regarding liquid natural gas (LNG), a two-week ceasefire meant little.

“The ceasefire means if may be possible for the 14 trapped laden LNG cargoes in the Gulf to exit the Strait of Hormuz and provide some relief to the global gas market,” pointed out Wood Mackenzie Europe sas and LNG analyst Tom Marzec-Manser. “But for there to be a real structural change in supply, the Ras Laffan site in Qatar would need to restart its 12 operable trains. It is unclear if QatarEnergy would consider doing this during a ceasefire, however.”

Assuming that QatarEnergy restarted Ras Laffan at the beginning of next month, it would take four months (that is, to the end of August) to bring all 12 trains back into full production. Of the two sites, North and South, in the complex, restarting the North site, which had a capacity of 41-million tonnes a year, would take a little over one month. The difficulties were mainly on the South site, which had suffered damage. Two trains there would take several years to restore, which would cut the site’s capacity from 36-million tonnes a year, to 24-million tonnes a year.

As for the UAE, Wood Mackenzie assumed that the Abu Dhabi National Oil Company Das Island LNG plant would be returned to service quite rapidly. “Outside LNG, domestic gas infrastructure in the UAE has been harder hit than oil, and that recovery process could require longer-term repair work,” he said.