Why Iranian oil could be the biggest energy story of the decade, with Aditya Saraswat

Let's Talk Energy — Episode 39 Why Iranian oil could be the biggest energy story of the decade, with Aditya Saraswat Wednesday, 27 May 2026 SPEAKERS NB Noah Brenner — Host, Let's Talk Energy AS Aditya Saraswat — Research Director, Middle East and North Africa, Rystad Energy [00:00] NB This is Let's Talk Energy, your go-to podcast for smart energy insights. I'm Noah Brenner. The energy market disruptions from the war in the Middle East are being felt across the globe every day. But the longer-term impacts to the most important oil and gas region in the world could be even more significant. In the near term, countries will work to repair damaged infrastructure and restart delayed projects while pushing ahead with their plans to expand capacity. NB Looking ahead, upstream dynamics in the region have already changed following the departure of the UAE from OPEC, and further shifts are likely as countries navigate an increasingly complex economic and geopolitical climate. So how has the war between the US and Iran changed the outlook for the upstream industry in the Middle East? And more pressingly, how long could it take to bring back some of this shut-in production? How are countries around the Gulf pursuing options to bypass the Strait of Hormuz, and just how much oil and gas could find alternative ways to market? And finally, will this experience change the way that international and national oil companies from outside the region look at investments there as they seek to replenish their own dwindling reserves? NB To give us a glimpse into the Middle East's upstream future in the wake of the most disruptive conflict there in decades, we're joined today from Tokyo by Aditya Saraswat, who heads Rystad Energy's research of the Middle East and North Africa. Aditya, welcome back to the programme. AS Konnichiwa, Noah. NB Well, let's talk energy. Any discussion of what oil and gas activity in the region could look like has to start with an understanding of your assumptions around how the conflict might end. What are you watching to understand the trajectory of the war as it's going right now, and any potential for peace? AS The nuclear enrichment capacity of Iran is the only variable that matters. That is the flag on the ground that we should look out for. Everything else, including ceasefires, diplomatic off-ramps, tactical exits, these are essentially the side actors to this agreement. But the nuclear enrichment capacity is crucial, and there's a reason for that. The diplomatic outreach to Iran has a 23-years-old history. It started back in 2002 when the world discovered these nuclear facilities, which resulted into the JCPOA agreement. Then there was a US exiting these agreements and we had sanctions on Iran. Very recently in October last year, the JCPOA expired and now we have this conflict. So unless we reach a durable resolution on nuclear enrichment capacity, the conflict is not over. There will always be a risk of escalation in the coming weeks and months. NB How much production is shut in now, and how could that production begin to come back? Let's start with how much production is shut in and where those key curtailed fields lie. AS As we speak, roughly 12 million barrels per day of crude and altogether 14 million barrels per day of liquids is shut in or disrupted. And about 85 million tonnes per annum of LNG capacity is offline. And that impact is not uniform. The way to map that mentally across the GCC countries is to think along the lines of a two-by-two matrix where how exposed you are to this conflict and what's your dependence on the Strait of Hormuz. So we have two buckets here, one including Qatar, Kuwait and Iraq, which are most impacted. With Qatar, the most impacted, where over 90% of crude oil production and the entire LNG offline. And then on the bottom end, we have Iraq, which is saved by the domestic refining capacity and some marginal takeaway capacities from Kirkuk-Ceyhan, essentially curtailing the production by two thirds of its pre-conflict levels. AS Then we have the second umbrella, which includes UAE and Saudi Arabia, which is benefiting not only from the domestic consumption and the refining capacity, but also the bypass of pipelines. And that has become quite crucial to limit the impact on crude oil production levels by only a third. So two thirds of the pre-conflict levels are still producing, and we will largely attribute that to the functioning ADCO pipeline in the UAE and the East-West Pipeline to the Yanbu port in Saudi Arabia. And thirdly, and most importantly, if you have to look into Iran, which has largely benefited from the conflict in the initial weeks because it was selling its crude at premium for the first time, because it was selling pre-conflict at around $10 to $12 per barrel to different refineries in East Asia. And that is added on top of another $10 to $12 per barrel of shadow cost, and essentially just giving it a netback of two thirds of the very low oil price levels at around $60 per barrel, up until the double blockade happened. So when the double blockade started, the production started to fall, and now we are seeing Iran again in the same bucket as UAE and Saudi Arabia, and falling as the storage is reaching its full capacity. [04:00] NB How long does it take to bring back that production that has been lost? Before we start to get into the future of the upstream in the region, how does it just get back to normal, and what are some of the factors you're watching as to how long that'll take? AS There are multiple factors which are defining the recovery timeline of these fields. First, what's the nature of the damage on your facility? Is it just that there is a decline? Has there been any damage? Has there been any blockages in your trunk lines and pipelines? That is one. Secondly, what is the nature of your field? Is it oil or gas? Thirdly, what sort of shutdowns you had? Was it partial? Was it full? That could break the recovery timeline as well. What underlines all of this together is after the normalisation happens, it is logistics, not geology, which makes or breaks the recovery. Think of it as a triangulation problem for the GCC countries. You have to produce a molecule essentially in this recovery trajectory. Then you have to ensure that the limited cushion you have in the storage gets utilised. And thirdly, you have to utilise the limited fleet of vessels you might have once all of these stuck fleet goes out of the Strait of Hormuz, and those which come back will have very high rate levels. And these three cannot be resolved simultaneously. AS The answer is oil by end of the year, but gas, because of the damages we have seen on LNG plants and gas processing plants, it will take anywhere from over a year to three to five years, depending on how they go about repairing these facilities. And the most defining factor is the impact we had on Qatar LNG trains. So how do you work around those impacted heat exchangers? How do you deal with repairing those? That will set the maximum limit — either would it be three years or five years from now on. NB What are some of the main bypass projects you're watching? We heard from the UAE that their pipeline to Fujairah is something like 50% complete. What else are you watching as having the potential to make the Strait of Hormuz less impactful? [08:00] AS A lot of exercise is being done in the background, trying to map out what could be a potential less riskier path to bypass your crude or your molecules outside of your current export terminals and most importantly outside of the Strait of Hormuz. Some of the key projects, as you rightly mentioned about the UAE, which is connecting the Jebel Ali terminal all the way to Fujairah, which will essentially double the bypass capacity. And to put that into perspective, essentially it can bypass the pre-conflict levels altogether. Secondly, we have the expansion of the East-West Pipeline in Saudi Arabia on the cards. The details have not been released yet, but those will involve massive expansion activities and with that, the investment levels. Thirdly, Iraq is inviting bids to bypass its most producing province, Basra, which produces close to 80% of the total production, and bypass that through Jordan and Syria. And there is an element to connect Kirkuk and the northern fields as well. These are the three key projects that we are seeing as we speak. AS Just to take that thought forward, essentially this entire conflict is not only about the Strait of Hormuz, it's also about the entire region. So over the past two, three months, we have seen attacks happening on both sides of the GCC countries. We have seen certainly towards the Gulf Passage, but also towards the Red Sea or towards the Indian Ocean. That does not mean that the region should not try, but ensuring the security will be a key risk factor that the region has to continue monitoring towards normalisation and beyond. NB What are some of the things NOCs can do to build resilience to future shocks? What does a more resilient marketing and export system look like if you're an Aramco or an ADNOC? AS You should defer or delay or reschedule as per your own terms. That is the luxury that the region should be looking out for, and that extends beyond the marketing of your molecules. Essentially, you need a diversified and flexible energy infrastructure. Then you need enough domestic EPC and supply chain capabilities. You need strategic inventories in your importing countries. That also includes some of the investments in the refining sector. And then you need to expand your international footprint. In addition to these bypass pipelines, the more you move towards your importing countries, your end consumer, through investing in their infrastructure and the downstream sector, it allows you to book long-term exposure and long-term security of your end consumer. AS In terms of activities, what we have seen in Saudi Arabia and UAE, the domestic fabrication capacities among other capabilities, supply chain capabilities, has allowed most of the activities to go in business-as-usual terms. Of course there are some delays, but by and large, that's your immediate hedge against any massive disruption. And diversified energy infrastructure allows you to manage the shocks through rebalancing these molecules and rebalancing your energy mix by utilising this flexible energy system. NB We didn't talk about Qatar — and that's one of the biggest outages impacting the world, the loss of Qatar's LNG capacity. What options does Qatar have? AS Qatar's problem is fundamentally different because it is stemmed into LNG production and LNG exports. Talking about the bypass pipelines, as you referenced, you can build bypass pipelines and export your oil through a rerouting exercise or the bypass exercise. But you cannot export LNG through pipeline. It has to be liquefied, loaded into tankers, and shipped. Until the strait opens, Qatar's gas is essentially locked up, because the LNG route needs to be opened up with the Strait of Hormuz. In the short term, Qatar can move modestly with the volumes flowing through the Dolphin Pipeline. But the overwhelming majority of the gas is being exported as LNG. [12:00] NB What about new upstream activity? This is a region that had massive plans for capacity expansion, and certainly some of those projects that were in the offing maybe had been paused or maybe not. What should we expect to see in terms of activity? AS The initial couple of weeks, the region was gauging the impact of the conflict. But as the repair bill grew and with that the bypass realities came into the picture that you have to invest in these bypass pipelines. Altogether, you are looking at close to $60 billion worth of investments, additional investments, on top of your baseline investment of $120 billion which the region was investing on an annual basis. And then you have a greenfield project pipeline of close to $100 billion. So it is quite comparable. This additional work scope will be met by inflation and limited capacities of the supply chain players. So you need to get out now and book capacities fast and think of it as a stop-loss exercise because if you wait, then you are paying more for the same amount of work scope. AS If you zoom out, up until now there was a trend between disruption, production outages and investment impact. But now moving forward, the investment impact will be decoupled from the production outages and the disruption, because the region is thinking beyond this conflict and they want to rebuild as soon as possible, starting with booking supply chain capacities at the earliest. NB When we last spoke in November, you highlighted the importance of offshore fields as the next legacy supply from the region — the phrase you used was 'offshore is the new onshore'. Is there enough there to carry the region forward, or do we need to start looking at other types of projects as well? AS When we look into these project cycles, most of the time horizon that we look out for is the next five to ten years. And certainly when you look into that time horizon, offshore is the new onshore as the onshore is hitting very high decline rates and needs incremental investment every year to just maintain the current production levels. So what's happening right now is in the onshore, you have a maintenance and EOR brownfield work going on to maintain that supply base. But on the offshore side, you need to expand and that's where the fresher barrels are and the entire region is shifting there. AS But beyond the next five, ten years, once you have these offshore expansions starting to produce, the next wave of growth will come from unconventionals. We are already seeing significant focus being done. We have seen the success of Jafurah. We are seeing great pace being done by the UAE in terms of utilising the unconventional resources, both oil and gas. And then we are seeing a great deal of contracts coming through in the rest of the region, including Bahrain and Turkey. And then we are seeing some initial studies being done in other parts of the region. The region is already aligning to assess the potential, to look out for the best development plan to realise that unconventional potential, so that once you mature these initial appraisal activities, you can safely build upon the production growth the offshore developments have given the region. NB The biggest change we've seen in the near term — the one we're most sure of in the upstream — is the UAE's decision to leave OPEC alongside plans to increase its production capacity and build a more resilient route around the Strait of Hormuz. Give us a snapshot of what things look like from the UAE perspective. Where is that additional oil coming from, and does the disruption set those plans back at all? [16:00] AS UAE has close to 4.8 million barrels per day, slightly over 4.8 million barrels per day of crude oil production capacity. It was producing close to 3.4 million barrels per day right before the exit, and holds close to 25% of actionable surplus crude oil capacity. From UAE's point of view, what it has done impressively is to significantly ramp up the capacity from pre-pandemic levels of 3.8 to currently at 4.85. And that has largely come from this brownfield expansion of ADNOC onshore, which involved a lot of these primary and secondary recovery techniques of its legacy fields like Bab and Bu Hasa, but at the same time expanding through greenfield developments in Lower and Upper Zakum. Altogether, these expansion phases, married with some marginal upside from the other offshore fields like Umm Shaif and others, have increased the capacity altogether to 4.85, and it's inches away from its goal of reaching 5 million barrels per day by 2027. AS And then when we look at the project pipeline, we also have an argument to make that it can very well reach closer to 5.5 million barrels per day as it lines up further expansion plans from especially the offshore fields. To top this 5.5 million barrels per day of capacity upside, you still have a lot of exploration works being done in the newly awarded blocks. And any meaningful discovered resources there will ramp up the tally even further. Altogether, there is a very active pipeline which will be expedited, but any meaningful supply response from the UAE is largely contingent upon how this conflict gets over. NB I want to flip that question around and look at it from an OPEC perspective. As you pointed out, the UAE took with it a good chunk of flexible spare capacity that the organisation relies upon to help manage the market. How do you see the organisation responding in the near term? Let's be honest, this isn't the first challenge that OPEC has faced in its 50-year history. AS OPEC will continue to be resilient because it has a good set of producers to respond to any market calls moving forward. In the near term, however, the current ongoing conflict masks any market calls, because now each and every producer, at least in the GCC region, is looking out to just maintain the current production levels and keep the fields running. But that will be an immediate priority that continues to be an immediate priority, but we'll have to wait for this conflict to be resolved before we see any sort of market exercises being taken up by OPEC. NB Looking further ahead, how do you see OPEC's approach perhaps evolving with the UAE sitting as a non-OPEC producer? AS When we look into OPEC, we have three buckets. One, where we have countries in the Middle East region which have this surplus capacity, which can actively ramp up and reduce production levels. And these countries are essentially important to react to any market calls on either side of the supply-demand exercise. Then you have a second bucket, which has been impacted by the underinvestment following the pandemic, and they are finding it hard to reach their reference levels based on which the cuts are being calculated, and the effective cuts are much lower coming out of the second bucket. And then you have the third bucket where the rest of the OPEC plus members come in, where you have your domestic demand mandate, you have ongoing conflict, let's say in Russia, and other limiting factors under compliance from Kazakhstan, all of that coming in to essentially further reduce any sort of cut calls coming out of the market exercise. [20:00] AS UAE went out from the first bucket. That means that any actionable and meaningful supply exercise will directly be impacted. So that's how critical UAE's exit is. And moving forward across different scenarios, let's say if UAE goes aggressive on supply additions and gets to, let's say, 5 million barrels per day by 2027, 2028, then you can reasonably assume another million barrels per day or more than that on oversupplied conditions, and which the OPEC plus has to respond by cutting back its supplies with limited capacities or limited pool of the producers which can effectively turn around these production cuts. So there has to be a recalibration exercise that needs to be done within OPEC to make sure the cuts are effective and distributed well across the wider group of OPEC members. NB Could OPEC get bigger? Could that capacity come from countries that are currently outside the organisation but perhaps willing to cooperate as we've seen in the past? AS That is a very inorganic way of producing other cuts, and that is a very well established route where OPEC can onboard new members as well. Normalisation of Iran — how it would impact the quotas which could be assigned to Iran — that could very well play out. We have a lot of countries coming out of especially South America, which is largely NOC-driven, that can be included. The possibilities remain endless, very hard to speculate at this point. But again, I think in the near term, at least OPEC has to do with the producers they have, and which are good enough to respond to the market conditions, because at least in this decade we are seeing oversupplied conditions because of increasing non-OPEC plus production. So the call is to cut back and that can be achieved successfully and resiliently with the current setup. NB How do you think IOCs and NOCs might be looking at those types of opportunities? AS These investment levels are critical for the rebuilding exercise, and for IOCs coming out of this conflict, certainly some of these companies might want to revisit their portfolio globally, and there could be some exits starting from the region. But then by and large, we have to also acknowledge a lot of these IOCs have been in the region for far too long and have seen similar conflicts in the past. The rebuilding exercise will lead to essentially a scenario in the 2030s where the non-OPEC plus growth will be limited, and then you have demand growth happening, and the Middle East capacity will be crucial and the producers have to produce at their maximum capacity levels. On top of that, that won't be enough — we need more exploration successes on top of it. So altogether, these repair bills, yes, they add on to the near-term cost levels, but the long-term opportunity is high, and they want to be part of that growth story and want to get benefit out of this growth story as we head into the next decade and the supply-demand dynamics are set to change. NB How do you see the investment dynamic between these companies and countries in the region that have historically driven a pretty hard bargain for access to their reserves? Does this change anything? [24:00] AS From the region's perspective, leading up to this conflict there was a great deal of focus on not only getting these investors and long-term partnerships and capital-intensive work processes moving forward, but there was an equal focus on in-country value creation and adopting technologies. The latter two — the in-country value creation and technology adoption — has proven to be a hedge against this disruption. So that will continue to be so, and there will be more focus moving forward. But in terms of partnerships with international oil companies, certainly there could be some impact in the premiums that the international players were paying to enter into the region. But on the flip side, you have a diversified pool of NOCs, INOCs, international players, especially here in Asia, wanting to be jumping on board to these opportunities while some of the players in the region might want to revisit their exposure in the Middle East. In the near term at least there could be some discussions around revisiting the partnerships, but in the long term we have enough growing pool of buyers to regain that attractiveness for the Middle Eastern barrels. NB The one we haven't talked about is Iran. You've been meeting with clients in Asia — how investable do they see Iran if we see sanctions lifted as part of some kind of durable peace agreement? AS Certainly, industry is positioning to a scenario where the sanctions are lifted in Iran, because that's the only way, as we see right now, to a durable resolution to the conflict. And in which you have different zones in which these IOCs are eyeing to invest. One is your oil fields, prolific oil fields between Iran and Iraq borders, which have significant upside and are currently contributing to a great majority of the oil production coming out of Iran. And here you have all the usual names, Marun, Azadegan, of Iran. And then you have a second focus area, which is the gas, especially in the offshore gas volumes, which has not only significant upside but can benefit a lot from proper reservoir management because it hasn't been exposed to that for a long time. And when you take that thought and development forward, Iran was looking at becoming an LNG exporter, which was largely delayed and deferred because of the sanctions which followed in 2018. But that's how the industry is positioning to look at how they would like to position in terms of producing assets. And then you have a great deal of unexplored acreages in the prolific Zagros fold belt, where you have all of these massive discoveries happening both in Iran and Iraq. So that can result into a long-term investment proposal for companies which are a bit more risk-seeking in Iran. AS But I think the common denominator is how long this resolution will stand, and that will create some sort of risk factor to it. But when you take, let's say, other examples in the region — you look at Syria — as soon as we saw some normalisation happening, you had all the major companies jumping in and trying to be part of that rebuilding story while Syria is preparing its regulations and policies. And while the country is trying to do that, we have significant interest from all the players in signed agreements to be part of that oil and gas production growth story. So it all ties back to the fact that if there is a normalisation happening and if the country has significant upside and prolific resource base, then the country will definitely see significant interest from the international oil players. But adding on to further details on it, what could limit this interest is the fiscal contract or the fiscal nature of Iran. It has changed from essentially a buyback nature to a dollar-per-barrel or a service contract nature of fiscal regime when last time the sanctions were lifted, which proved to be functional during that time. But now I think they have to provide more fiscally attractive terms wherein these players can book resources, and with that they can retain long-term interest from these international players to continue investing in the oil and gas sector. The investment appetite will largely depend on first the nature of resolution of the current conflict, second the risk-seeking nature of these players, and thirdly the fiscal terms — does Iran change those or continue ahead with the service contract nature of the terms? These three factors can make or break the onboarding of international players in the Iranian upstream sector. [28:00] NB I want to zoom far out here and just think about — at the end of the day, how does the war, the situation that we're seeing, the potential for resolution, impact the production profile of the region over the next five or ten years? Does this set it back, or are there arguments that this is actually accelerating some of the production capacity gains that perhaps we could see in the future? AS The fundamental story hasn't changed. The architecture certainly has, especially the governance of the Middle Eastern barrels, which came through OPEC — that structure has changed. But in the 2030s and beyond, we need more barrels out of the Middle East. There is no replacement of these barrels for quality or quantity alike. We need to continue building onto this capacity in the Middle East region. And that remains to be the core focus area for the Middle Eastern barrels to continue feeding the growing demand once the non-OPEC plus supply starts to peak and react to the market conditions, which will largely call for increased production levels out of the Middle East as we enter into the 2030s. AS So yes, we have temporarily entered into this conflict, which has taken the sight away from continued investment. But then slowly and gradually, as we find our feet after this conflict into the oil and gas investment space, we need to start building and build fast, to make sure that the Middle Eastern capacities are growing and flexible enough to respond to growing demand in the 2030s, which would be crucial to avoid getting into any energy security concerns. NB Aditya, thank you so much for joining us, and smooth and safe travels. AS Thank you, Noah. NB Let's recap. Upstream activity in the Middle East has seen massive disruptions that are changing the industry's dynamics, whether that's the exit of the UAE from OPEC, or the proliferation of pipelines designed to bypass the Strait of Hormuz. While Middle East NOCs will need to spend significant sums to repair and restart fields, they will also quickly push ahead with their ambitious expansion plans, potentially creating opportunities for additional outside investment. And at the end of the day, the world needs the region's reserves, and countries there are likely to find plenty of partners, whether that's companies or other countries that are keen to invest in those low-cost, low-carbon barrels. [32:00] NB Thanks for listening to Let's Talk Energy. This podcast is a Rystad Energy production, produced by Elliot Busby and Bade Og. Check out the show notes for further analysis on the topics we've discussed today, and connect with us on social media — we're at Rystad Energy on all major platforms. 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