A growing repair bill

How much is it going to cost to patch up all the war-damaged energy facilities in Iran and the Gulf? Some USD 25 bn, according to researchers at energy intel group Rystad Energy. The growing price tag comes as dozens of energy facilities — including some of the world’s most vital oil fields, refineries, natural gas facilities, ports (and one nuclear power plant in Iran) — have been hit over four weeks of war.

At this point, the extent of the damage means that a reopened Hormuz won’t be the only factor in returning to pre-war energy output. Some energy facilities could take years to restore due to structural limitations in repair operations.

Qatar’s Ras Laffan has had the worst of it, with damage to LNG facilities taking out 17% of its production capacity. Procuring new turbines to operate refrigeration compressors could be delayed since the world’s few suppliers are already facing long backlogs that are partly driven by data center power demands. Full restoration could take up to five years due to procurement obstacles.

Bahrain had barely completed a USD 7 bn upgrade to its BAPCO Sitra refinery before having to declare force majeure after the facility was struck… and there goes revenue that was supposed to cover revamp costs. Bringing back contractors to repair two damaged crude distillation units and a tank farm with higher re-mobilization costs and war-level insurance markups will be costly, the report estimates.

Also facing repair projects: Iran’s South Pars offshore gas field and Tehran Refinery, as well as multiple downstream facilities including the Shahran, Shahid Dolati, and Shahr-e Rey oil depots. Qatar is also looking at moderate repair work at its Pearl GTL downstream facility, as are the UAE and Iraq at the Ruwais and Lanaz refineries.

The recovery timeline for facilities across the region will also depend on how fast capital is deployed and how efficient execution would be, Rystad notes. Rising shipping costs — which Hapag Lloyd estimates are racking up an additional USD 50 mn per week — are “likely to be passed onto consumers.”