Adipec 2024: World's oil firm bosses see Middle East conflict as greatest threat

Opec supply cuts adding to oil market volatility, Eni chief says

From left, moderator Becky Anderson from CNN, Murray Auchincloss, CEO of BP, Wael Sawan, CEO of Shell, Tengku Muhammad Taufik, CEO of Petronas, Musabbeh Al Kaabi, executive director of Low Carbon Solutions & International Growth at Adnoc, and Claudio Descalzi, chief executive of Eni at a panel session at Adipec. Antonie Robertson / The NationalShow less

Energy leaders on Monday expressed concerns over geopolitical tension in the Middle East and the potential impact on crude supply from the region. However, they added that the outcome of the US presidential election is unlikely to influence investment decisions in the region in the short term.

The Middle East is embroiled in geopolitical turmoil, with heightening tension between Israel and Iran, along with conflicts in Gaza and Lebanon. So far, energy infrastructure has not been affected directly.

“The conflict in the Middle East is probably the top risk to the world right now,” BP chief executive Murray Auchincloss said during a panel of energy industry heads at the Abu Dhabi International Petroleum Exhibition and Conference (Adipec).

Geopolitical tension in the region is at the “top of the mind”, even as a long-term challenge, Mr Auchincloss added.

About a third of the world's oil is produced in the Middle East. Saudi Arabia, Iran, Iraq, the UAE, Kuwait, and Qatar are among the top exporters in the region.

British oil company Shell’s chief executive also said he was concerned about the Middle East troubles in the short term.

“The Middle East conflict is what keeps me awake at night at the moment, more than anything else,” Wael Sawan said during the same panel discussion.

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In the longer term, energy demand will depend on markets in the US and China – two of the world’s largest economies, Mr Sawan said. “In particular, the Chinese market, and … the impact it could have on the supply chain [and] the redrawing of the energy complex globally.”

US election

The US presidential election on Tuesday is expected to have significant consequences for national and global energy, as well as climate policies.

If Republican candidate Donald Trump wins, he is widely expected to reverse some clean energy and climate policies, while loosening regulations on oil and gas.

“We always work with whoever wins an election very comfortably,” Mr Auchincloss said. “I suppose the big challenge the US faces right now is regulatory [and] permitting reform. I hope whoever wins the election can really start to tackle [that]."

Mr Sawan said it was difficult to predict the respective impact of a Mr Trump or Kamala Harris administration on the energy sector.

“It was under the previous Trump administration that you saw the largest growth in renewables, and under the current Biden administration, you had a great surge in oil and gas, so I think at the end of the day economics plays a critical role as well,” he said.

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Shell will keep an eye on potential changes to the US Inflation Reduction Act, which contains billions of dollars in new spending and tax breaks that aim to boost clean energy and electric vehicle ownership.

“The area that we are monitoring is what happens with the Inflation Reduction Act, which provides a stimulus into certain parts of the energy complex,” Mr Sawan said.

Shell is “selectively” investing in those spaces but most of the investments play out over “at least a decade”, he added.

“The payback periods on these [investments] are anywhere between eight to 15 years, so you have to look through a single administration."

Opec+ volatility

The chief executive of Italian energy giant Eni said Opec+ oil supply cuts and recent efforts to unwind output curbs have raised volatility in global energy markets.

“Opec is playing a big role … but you saw that as soon as they say we are going to release some production, the price went down immediately,” Claudio Descalzi said.

“Now they say we postpone until the end of the year and that has made a big impact on the market. I think the volatile situation is not good."

On Sunday, eight Opec+ member countries agreed to extend voluntary production adjustments of 2.2 million barrels per day for a month until the end of December this year amid a slump in oil prices.

“Saudi Arabia, Russia, Iraq, the UAE, Kuwait, Kazakhstan, Algeria and Oman, which previously announced additional voluntary adjustments in April and November 2023, have agreed to extend the November 2023 voluntary production adjustments,” the group said in a statement.

Oil prices jumped more than 2.5 per cent on Monday after the Opec decision. Brent, the benchmark for two thirds of the world's oil, was trading 2.67 per cent up at $75.05 a barrel at 6.14pm UAE time. West Texas Intermediate, the gauge that tracks US crude, was trading 2.92 per cent higher at $71.52 a barrel.

Brent is down by about 20 per cent since reaching $91 a barrel in April, as demand concerns from China and other developed economies outweigh fears of supply disruption in the Middle East.

In a separate panel, Opec's secretary general said he was confident about crude demand in the long term. "Economic growth [is] doing well despite all the talk about negative economic growth. Yes, there are some challenges but the picture is not as negative as some make it sound," Haitham Al Ghais said.

"Those who have that peak-demand scenario in their vision are now pushing the timeline even further out."

The International Energy Agency has predicted demand for oil, coal and gas is set to peak by 2030 amid growing adoption of electric vehicles and renewable energy.

However, Mr Al Ghais said: "Peak demand is not going to happen, we're not going to have that because the world keeps growing."