Iran War Triples Logistics Costs for Oil Services Firms
Iran War Triples Logistics Costs for Oil Services Firms Julianne Geiger is a veteran energy journalist and market analyst with more than a decade of experience covering the global oil and gas sector.
Her… Oilfield services companies are paying as much as three times their usual logistics costs in the Middle East, with fuel expenses doubling and labor costs climbing by as much as 40%, as the Iran war continues to disrupt equipment deliveries and project operations.
Executives speaking Tuesday at the ADIPEC energy conference in Abu Dhabi described mounting financial pressure from the nine-month conflict, which has damaged infrastructure, forced employee evacuations, and made moving equipment through the Strait of Hormuz increasingly difficult.
Alessandro Bernini, CEO of Italian engineering company Maire, said logistics costs on some Middle Eastern contracts have tripled, while labor expenses have risen between 30% and 40%.
Those increases are cutting into contractors' margins and raising the cost of completing energy projects.
Bernini warned that the additional expenses would eventually contribute to higher energy prices and inflation.
For Saipem, another Italian energy contractor, the problem is getting equipment to its destination in the first place.
"We have been sitting outside Hormuz for months," CEO Alessandro Puliti told the conference.
National Energy Services Reunited (NESR), which operates across Saudi Arabia, the UAE, Kuwait, Oman and Iraq, has been storing materials in warehouses for longer periods to protect against supply interruptions.
Those precautions come with additional costs that contractors often cannot recover.
"You eat it most of the time," NESR CEO Sherif Foda said.
Recent earnings reports show how uneven the industry's recovery has been.
| Product | Price | Change |
|---|---|---|
| Brent Crude | $102.14/bbl | +0.34% |
| WTI Crude | $96.90/bbl | +0.21% |
| EN590 Diesel | $846/MT | +0.18% |
| Jet Fuel A-1 | $1090/MT | +0.55% |
| Mazut M100 | $450/MT | -0.15% |
| Bitumen 60/70 | $470/MT | +0.08% |
| Sulphur Gran 99.5% | $470/MT | -0.44% |
| Urea 46% Gran | $650/MT | +1.12% |
| NPK 16-16-16 | $460/MT | -0.28% |
| Nat Gas TTF | $15.42/MMBtu | +0.92% |
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