Middle East conflict deals $25b blow to energy infrastructure

The speed of recovery will depend on execution capacity and capital deployment timing.

Energy infrastructure repair and restoration costs to date due to the Middle East conflict could reach at least $25b, according to Rystad Energy.

For instance, the destruction of liquefied natural gas trains S4 and S6 at Qatar’s Ras Laffan Industrial City has triggered a force majeure and a 17% capacity loss, totalling 12.8 million tonnes per annum.

The report said that capital cannot bypass a recovery timeline of up to five years. “This delay is driven by a global supply bottleneck as only three manufacturers produce the essential large-frame gas turbines required for refrigeration,” Rystad Energy said.

Bahrain also faces a unique disruption at the BAPCO Sitra Refinery, where two strikes on crude distillation units (CDUs) and a tank farm have triggered a group-wide force majeure.

“The primary hurdle here is not a lack of equipment, but the catastrophic timing of the damage following a $7b modernisation program that reached mechanical completion only last December,” the report said.

Because the destruction occurred just months after first production, the refinery has lost its brand-new processing capacity and the immediate revenue needed to service its massive investment.

Restoration now requires re-mobilising international contractors at conflict-inflated costs and navigating uncertain war-risk insurance for assets that had barely transitioned into operation.

Rystad Energy said that the speed of recovery in the region will depend on execution capacity and capital deployment timing, as repair spending ramps up.

“Operators are likely to prioritise restoring existing fields instead of new developments, creating demand for engineering, procurement and construction contractors and original equipment manufacturers.”

Further, continued sanctions in Iran would limit access to Western contractors and technology, leaving domestic and East Asian players to capture most recovery-related activity.