Shell CEO Wael Sawan warned that the blockade of the Strait of Hormuz could push energy shortages into 2027, citing a 900 million barrel production gap that has been filled only by stock drawdown. The move underscores the fragility of global supply lines amid geopolitical tensions.
The backdrop is the U.S.-Iran conflict that began in late February, which has cut off roughly 20% of the world's oil and natural gas from passing through the Persian Gulf. As a result, Iraq, Kuwait and Qatar have halted production, and Asian buyers are competing for remaining supplies, driving Brent crude to $111.19 a barrel.
In a bid to mitigate risk, Shell agreed to acquire Canadian shale producer ARC Resources for $13.6 billion, its largest deal in more than a decade. The purchase is intended to support production growth through 2030 and bolster the LNG Canada facility that exports natural gas to Asia.
Sawan explained that the company has been evaluating ARC for two years before the Iran war, and that the acquisition is part of a broader strategy to diversify production. He noted that the situation is profound, affecting both oil and LNG. Regarding the current shortage, Sawan said, "We are talking about roughly 900 million barrels that haven't been produced in the last couple of months and that's been replaced essentially by stock drawdown." He added that demand curtailment and fuel switching are now occurring in certain areas.
Looking ahead, Shell expects supply-demand balances to remain tight for the coming months, if not into next year, and will continue to pursue new horizons while managing the immediate impact of the Strait blockade.
