Rystad estimates that the cost of repair and restoration to damaged energy infrastructure could reach at least 25 billion dollars. The company expects this figure to increase based on their assessment of the affected facilities.
According to Rystad’s analysis, “spending will likely be driven by construction and engineering followed by materials and equipment.”
The Middle East war has caused severe global disruptions in oil and gas supplies.
According to reports, the conflict caused damage and shut downs in vital energy infrastructure across the region. This includes LNG trains, refineries and fuel terminals as well as critical gas-to liquids facilities.
Ras Laffan’s Industrial City in Qatar is a notable exception to the breakdown of costs for repairs and timelines.
Ras Laffan in Qatar
A 17% capacity reduction has been declared due to the destruction of LNG train S4 and S6. This is equivalent to 12.8 Mtpa.
Rystad said that restoring the facility would require more than capital. A complete recovery could take as long as five years.
This is because of a worldwide shortage of large gas turbines, which are needed to power the compressors that cool the LNG.
The Norwegian energy intelligence firm added that only three OEMs supply the turbines. They all had significant backlogs in production of two to four year, driven mainly by the demand for data center electrification, as well as the decommissioning coal plants.
Recovery in the Gulf will be more influenced by structural constraints than the availability of capital.
Audun Martensen, Rystad’s head of supply-chain research, explained that while some assets could be restored within months, it may take many years for others to reach their full potential.
Martinsen stated that “beyond what is happening in the Strait of Hormuz and the damage or shutdown of infrastructure, each day of this damages the pre-war capacity of production.”
He said that the South Pars field in Iran and Qatar’s Ras Laffan facility were two cases of particular concern.
Martinsen stated that the recovery at Ras Laffan will be slow because of the extensive damage to equipment and the lengthy lead time required to get essential parts.
Iran is legally prohibited from participating in the Western supply chain, and therefore, it will have to rely on Chinese contractors.
This approach, although technically feasible, may be both slower and costlier.
Investment cycle constraints
Bahrain, a neighboring country, has also experienced a disruption.
BAPCO Sitra Refinery has been hit two times, with confirmed damage to two crude distillation units (CDUs) and one tank farm. This prompted a force majeure declaration across all group operations.
Equipment shortages and sanctions are not the main constraint, but rather the timing of damage compared to an asset’s investment cycles.
In December last year, the facility was just about to complete its modernisation project worth $7 billion. According to Rystad, when the attack occurred, EPC contractors were still on site finalising their ramp-up requirements.
According to the agency, the destruction of an newly-commissioned CDU, just a few months after its first production, eliminated new processing capability.
The revenue intended to fund the large investment made recently is delayed.
According to Rystad, the restoration of damaged units may also require the mobilisation of international contractors.
The assets are only recently online, so the costs will be inflated due to the war and the insecurity of the insurance.
In other countries such as Kuwait, Iraq and the UAE there were moderate to minor disruptions.
The domestic EPC eco-system: A key factor in recovery speed
Rystad Energy’s analysis found that the closeness and density of the local Engineering, Procurement, and Construction ecosystem around each facility is a crucial, but often overlooked, factor in determining the recovery path. This fact was generally ignored by standard damage assessments.
The rapid restart of Saudi Aramco at Ras Tanura where teams had already arrived for an upcoming turnaround, when debris fell within the perimeter area, is the best example to illustrate the benefits that come from having a deep level of domestic capabilities.
The speed of regional recovery depends on how quickly capital is deployed and whether it’s being executed as the repair budget increases.
The analysis said that operators will focus more on the restoration of existing fields than new development, which would increase demand for EPC and OEM contractors, particularly those who have regional experience or agreements in place with national oil companies.
Rystad stated that the near-term focus will be on site preparation and inspections, then equipment replacements and construction, as purchasing constraints decrease.
Continued sanctions in Iran would restrict access to Western technology and contractors, leaving the domestic market and East Asian actors to take most of recovery related activities.
The post Middle East faces a repair bill of at least $25B for damaged energy infrastructure may be updated as new information becomes available
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