Oil and gas companies look for new exploitation locations outside the Middle East

Iran’s attacks on energy infrastructure in the region and blockage in the Persian Gulf have sparked a global search for oil. Some Western oil and gas companies have lost billions of dollars in revenue because of the conflict. However, sharp increases in energy prices have brought large cash flows to the oil and gas industry, helping them expand into areas that were previously difficult to reach or had been abandoned.

WTI (US) crude oil price is currently trading around 90 USD per barrel, significantly higher than the level of more than 60 USD before the war broke out. Oil prices dropped sharply on April 17 after Mr. Trump and Iranian officials announced the reopening of the Strait of Hormuz, but increased again on the morning of April 20 when Iran closed this route again.

Exxon recently outlined plans to invest up to $24 billion in deepwater oil fields in Nigeria. Chevron expands presence in Venezuela. BP bought shares in oil blocks offshore Namibia, and TotalEnergies signed an exploration agreement with Türkiye. According to estimates by energy research and consulting company Wood Mackenzie, large oil and gas corporations could create $120 billion in economic value from exploration activities in the coming years.

In a meeting on April 16 with leaders of Exxon, Chevron and other oil and gas companies, US Secretary of Energy Chris Wright and Secretary of the Interior Doug Burgum called on businesses to continue increasing production to restrain prices, amid the risk of global supply shortages.

WSJ Citing close sources, oil and gas companies also want to maximize production to take advantage of high prices. But this activity must still be within budget limits, avoiding costs from large-scale investments. In total, the oil majors spent an average of $19 billion on exploration globally each year between 2021 and 2025, Wood Mackenzie said.

Energy industry leaders are also focused on a longer-term goal, which is to find enough oil and gas to maintain profits until 2030. The closure of the Strait of Hormuz has caused the global loss of about 20% of oil and liquefied gas supplies.

Some Western companies operating in the Middle East have suffered significant losses. Exxon said the fighting caused its output to decrease by 6% in the first quarter. The company risks losing about $5 billion in revenue each year when gas facilities in Qatar are damaged. Their partner QatarEnergy estimates repairs could take up to five years.

Analysts say that currently, the oil and gas industry is less focused on the Persian Gulf. A few days before the war broke out, Chevron said it was in exclusive negotiations with Iraq’s Basra Oil to buy shares in the West Qurna 2 field – one of the world’s largest onshore oil fields. However, analysts assess that Western companies are unlikely to sign major agreements in the Middle East until the conflict is completely resolved.

The economic impact from the war also causes companies to diversify their portfolios and spread risks globally. According to Wood Mackenzie, the global oil and gas industry needs to find new resources, with reserves of 300 billion barrels of oil, to meet demand by 2050. Exxon, Chevron, Shell, BP and TotalEnergies are targeting new drilling opportunities in Africa, South America and the eastern Mediterranean, to supplement reserves for the next decade.

Last week, Exxon took another step forward in its oil drilling plans off the coast of Greece. In recent months, the company signed preliminary exploration agreements with Iraq, Türkiye and Gabon. In Trinidad and Tobago, the company also surveys for oil and gas in deep water. Expenses for Exxon’s international operations last year were about $9 billion.

Chevron also beefed up its exploration business. Last year, they acquired oil and gas exploration company Hess for $53 billion. The company has appointed Kevin McLachlan – former head of TotalEnergies – as Vice President of Exploration. Chevron plans to spend $7 billion on global offshore projects this year.

The White House also urged US oil and gas companies to increase investment in Venezuela’s oil industry. However, most businesses are still cautious after many years of this industry here deteriorating due to poor management.

Chevron is also currently Venezuela’s largest foreign investor. Reuters said last week it had reached an asset swap agreement to expand its operations here. Venezuela has large reserves of heavy oil, favored by US refineries.

Venezuela’s National Petroleum Corporation (PDVSA) sold an additional 13% stake in a joint venture to Chevron. Another project in which Chevron holds a 30% stake has been granted exploitation rights.

Chevron plans to explore in Egypt this year. Previously, they were also granted four offshore exploitation licenses near Greece and an oil block in Libya.

Oil prices are forecast to remain high in the coming months, even when the blockage in the Strait of Hormuz is resolved. “Long-term high oil prices are the most favorable factor for exploration activities. In the medium and long term, the price of each barrel of oil from the Persian Gulf will have to add a risk premium. This further motivates companies to find new exploration areas,” concluded Schreiner Parker – expert at Rystad Energy.