Analysis: Oil accumulation could cause "explosions" in the Middle East

The decisive moment is about to arrive.

The Strait of Hormuz has reopened, for now, and the Middle Eastern countries that shut down their oil wells during the war are about to reopen the valves and find out what they have in their hands.

A pressure cooker might solve the problem. Or, if President Donald Trump's predictions come true, a series of underground explosions could leave oil wells producing just a trickle of water.

This is highly unlikely. But as with most of Trump's sensational claims, there is at least a grain of truth to this.

Box of chocolates
Shortly after Iran effectively closed the Strait of Hormuz to foreign oil tankers, local energy producers ran out of space to store their accumulated oil and gas.

Many neighboring wells in the Middle East had stopped producing. The threat of drone attacks has forced several Saudi, Emirati and Iraqi facilities to suspend operations for the duration of the war.

Iran also had to shut down its wells this month after the United States began blocking the strait.

Shutting down is not as simple as flipping a switch. It represents a complex engineering challenge involving advanced physical principles and meticulous planning over days or even weeks.

When oil wells are shut in, underground pressure can become unbalanced, deforming the underlying structure. These changes can damage reservoirs, which can lead to similar problems in nearby wells. Water can seep in, reducing the well's potential production.

"The concern lies in what will happen when operations resume," said Vikas Dwivedi, global oil and gas strategist at Macquarie Group. "It's like a box of chocolates: you never know what you're going to get."

Prolonged inactivity can also damage equipment. Pumps and lifting systems can corrode easily. Sand and debris can accumulate. Concrete pipes and linings - used to seal and extract oil - can lose their integrity, causing leaks and possible releases of dangerous gases.

And yes, in exceptional cases, explosions.

Explosive oil?
A few months ago, Trump had been constantly talking about this possibility.

- April 23, Oval Office: "If you don't get the oil moving, the entire oil infrastructure is going to explode. Do you know what that means? Because there will be no place to store it, and because there is no place to store it, if extraction has to be stopped... something happens underground that leaves it in a terrible state and from which it never fully recovers."
- April 26, Fox News: "When you have, you know, pipelines with huge amounts of oil flowing through the system, if for some reason that pipeline gets shut down because you can't keep loading the oil into containers or ships, which is what happened to them (they don't have ships because of the blockage), what happens is the pipeline explodes from the inside, both mechanically and underground." underground oil tends, almost 100% of the time, to explode and destroy everything around it. And this oil can never be recovered."

But Trump's description does not match reality. Oil industry analysts agree that there was almost certainly no serious damage - much less an explosion - during the war.

"A key question is whether prolonged shutdowns could translate into permanent production losses," said Natasha Kaneva, head of global commodities strategy at JPMorgan. "It is likely that these risks are being overestimated."

Wells have been closed for long periods before, including in Iran.

In the early days of the pandemic, when virtually no one was traveling, the world ran out of space to store the fuel no one wanted, and oil was selling at negative prices. Producers around the world have closed their wells without suffering significant or permanent damage.

Some Middle Eastern suppliers also temporarily shut down their wells when OPEC production limits came into force. The oil industry, even in a country as economically fragile as Iran, dealt with the problem without any major difficulties at that time. And she's well prepared to face him again this time.

Additionally, Kaneva noted that temporary outages can sometimes benefit a well by rebalancing underground pressure and even producing more oil than before.

Production will have to be resumed gradually
Resuming production at the end of a war is not as simple as pressing a button. The problem is the opposite.

Production will need to resume gradually over several weeks to prevent oil fields from collapsing, which would require extensive drilling and repairs. Producers will have to balance underground pressure while injecting water and gas into wells to extract the oil.

Considering that the wells in the region are large and located very close to each other, the resumption of production will require significant coordination between companies and countries to ensure constant pressure in all wells. Otherwise, collapses, leaks and catastrophic damage could occur.

Whenever a well is closed, the producer runs the risk of having a reduction in oil flow when it is reactivated. To prevent this, some operators maintain low oil flow rates, similar to turning off a faucet in cold weather to keep pipes from freezing.

But the industry knows this. Iran has a lot of experience dealing with shutdowns and restarts.

Don't expect an explosive ending to this story.

Source: CNN