An all-out war in the Middle East remains unlikely, despite Israel’s likely upcoming retaliation against Iran in response to Iran's attack on Israel, Matthey Bey, a senior analyst at RANE, told Rigzone.
“The United States, Iran, and Israel all seek to avoid a full-blown war and this will likely prevent one from occurring and at some point all sides pursuing de-escalation from the current crisis, perhaps if Israel’s response to Iran is relatively modest,” he added.
Corey Ranslem, the CEO of Dryad Global, told Rigzone that, right now, it doesn’t look like an all-out war will erupt in the wider Middle East.
“However, that could change depending on the Israeli response to the attacks from this past weekend,” he added.
“The G7, and most countries within the Middle East, do not want to see an expanded region conflict in the Middle East,” he continued.
Bey told Rigzone that an all-out war would likely lead to a significant increase in oil prices if U.S. forces are drawn in, “given that Iraq, and its 4.2 million barrels per day of production, and Syria are the locations where Iranian and Iranian-backed militias are in closest proximity to U.S. forces”.
Ranslem also noted that, if the conflict expands or there are any supply disruptions, “we could potentially see oil prices increase”.
Kuwait 1991 Similarities?
In the event of an all-out war, could we see oil wells blown up like in Kuwait in 1991?
“That is a great question,” Ranslem said.
“It is very difficult to anticipate what any party would do in an all-out war within this region. Currently there are too many mitigating factors to consider ahead of tactics and strategy,” he added.
Responding to the question, Bey said it’s “not likely to be on the same scale”.
“Neither Iran or the U.S. would have an incentive to hit Iraqi or even Kuwaiti oil wells, but Iranian-backed strikes on Emirati or Saudi oil and gas infrastructure reminiscent to the 2019 Abqaiq and Khurais strike is possible if the UAE or Saudi Arabia is viewed as helping facilitate U.S. military efforts against Iran, which would be likely in such a scenario,” he added.
Blown Up Wells
As the first Gulf War drew to a close in February of 1991, retreating Iraqi forces systematically blew up oil wells, tanks, refineries, and other facilities in Kuwait, Bechtel’s website notes.
“According to some estimates, the resulting fires burned four to six million barrels of crude oil per day. In addition, oil spilled into low-lying areas and trenches in the desert. Some were set on fire,” it adds.
“On behalf of the Kuwait Oil Company, Bechtel and an international team took on the raging fires, managed the environmental restoration, and reconstructed the country’s oil production facilities,” it continued.
The team extinguished and capped 650 damaged or burning oil wells in Kuwait in nine months, according to the site, which states that, in 12 months, oil production was restored to pre-war capacity.
“Bechtel mobilized an international force of more than 16,000 workers to put out the wellhead fires, stop the gushing flow of oil, and help resurrect oil fields,” the site notes.
Volatility Is Here to Stay
In an oil market update focusing on the Iran-Israel situation, which was sent to Rigzone late Monday, Rystad Energy Senior Vice President Jorge Leon said, “tensions are high, and either party’s next moves are hard to predict, but all the significant signs point toward an easing of hostilities and restraint in the short term”.
“One thing is for certain - volatility is here to stay,” he added.
In the update, Leon said further escalation in the Middle East cannot be ruled out, describing it as “something that would rapidly increase the geopolitical risk premium in the oil market”.
“Still, we believe that the most likely scenario now is for all sides to show restraint in the coming days and weeks … even though Israel’s military chief has just announced that the nation would respond to the weekend strike,” he added.
To contact the author, email andreas.exarheas@rigzone.com
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