Introduction
On June 19, 2025, Shell CEO Wael Sawan warned in Tokyo that “if the Strait of Hormuz were blocked, it would have a tremendous impact on global trade.” The blockade of this strait, through which approximately one-quarter of the world’s crude oil transactions pass, would have completely different impacts on each oil major based on their asset composition. This analysis examines the specific implications for each company based on objective data.
Chapter 1: The Reality of Middle Eastern Assets of the Five Oil Majors
Shell: Maximum Dependence on the Persian Gulf
Shell’s Middle East strategy involves diversified investment across the region, but its core lies in large-scale gas and LNG operations in Qatar. The Pearl GTL facility is the world’s largest GTL plant, 100% operated by Shell, producing 140,000 barrels per day equivalent of high-quality liquid fuels. The company’s Qatar LNG operations span multiple projects: a 30% stake in QatarEnergy LNG N(4) with 7.8 million tons per year, a 6.25% stake in the North Field East project with 32 million tons per year, and a 9.375% stake in theNorth Field South project with 16 million tons per year.
In the UAE, Shell participates in major domestic gas supply operations through a 15% stake in ADNOC Gas Processing, and is scheduled to join the Ruwais LNG project in 2024 with a 10% stake in the large-scale LNG facility producing 9.6 million tons per year from 2028. In Oman, through a 34% stake in Petroleum Development Oman (PDO), it operates over 200 oil fields, while in Iraq, it develops associated gas recovery operations with a 44% stake in Basrah Gas Company. Shell’s Middle East dependence is estimated at 400,000 BOE per day, accounting for approximately 14% of total company production.
ExxonMobil: Qatar Concentration and Strategic Withdrawal
ExxonMobil’s Middle East strategy has been consolidated into three countries—Qatar, UAE, and Saudi Arabia—as a result of thorough selection and concentration. Particularly significant was the company’scomplete withdrawal from Iraq’s West Qurna-1 oil field in January 2024. The company sold its 32.7% stake and completely withdrew from Iraq’s energy sector.
Its presence in Qatar is overwhelming, and it participates in five major LNG joint ventures as QatarEnergy’s largest partner. It holds the world’s largest LNG interests with 52.3 million tons per year, and liquid gas capacity reaches 3.4 billion cubic feet per day. The UAE’s Upper Zakum field holds approximately 28% stake, targeting production capacity of 1 million barrels per day as the world’s second-largest offshore oil field. Saudi Arabia concentrates on petrochemicals rather than upstream operations, holding 50% stakes in Al-Jubail, Yanbu, and Aramco Mobil companies.
TotalEnergies: Highest Middle East Dependence
TotalEnergies shows the highest Middle East and North Africa dependence among the five oil majors. In 2024, the region produced 807,000 BOE per day, equivalent to approximately 30% of total company production. In Iraq, it develops production at Ratawi field and early gas processing operations at GGIP, recovering previously flared gas to supply fuel for power plants.
The UAE has secured new production assets through participation in the SARB Umm Lulu oil field groups. Oman has a production capacity of 1 million tons per year through increased production at the Bloc 10 gas field and the newly operational Marsa LNG project. In Saudi Arabia, it has won a 300MW solar power project in partnership with Aljomaih Energy and Water Company.
BP: Limited Involvement and Future Investment
BP’s Middle East strategy is the most cautious and selective compared to other majors. Current upstream assets are extremely limited, so the company focuses on strategic investment in promising future projects. The Kirkuk oil field redevelopment project in Iraq reached afinal agreement in February 2025 but is awaiting government approval.
It is scheduled to participate in the UAE’s Ruwais LNG project from 2028 with a 10% stake in the large-scale LNG facility producing 9.6 million tons per year. In Egypt, it established Arcius Energy in a 51-49 joint venture with ADNOC’s subsidiary XRG, planning to expand its gas business across the Middle East region.
ConocoPhillips: Complete Specialization in Qatar
ConocoPhillips’s Middle East strategy is completely specialized in Qatar’s LNG operations. Centered on a 30% stake in QatarEnergy LNG N(3), it has LNG production capacity of 7.8 million tons per year. In 2024, it produced 83,000 BOE per day (13,000 barrels of crude oil, 8,000 barrels of NGL, 374 million cubic feet of natural gas). It holds 25% stakes in both North Field East and North Field South projects as the foundation for future LNG production capacity expansion.
Chapter 2: Geographic Constraints of Strait of Hormuz Blockade
Geographic Reality of the Persian Gulf
The Persian Gulf has a geographically dead-end structure, with the Strait of Hormuz as its only maritime outlet. All maritime exports from Qatar, UAE, eastern Saudi Arabia, southern Iraq, and Kuwait have no choice but to physically pass through the Strait of Hormuz. Therefore, for oil and gas assets in these countries, a Strait of Hormuz blockade is not a matter of alternative transportation routes, but a binary choice between continued production or shutdown.
Limitations of True Alternatives
The actual available alternatives are minimal. Saudi Arabia’s East-West Pipeline connects Ras Tanura on the Persian Gulf coast to Yanbu on the Red Sea coast, with a transportation capacity of approximately 5 million barrels per day, but this is limited to Saudi crude oil. Iraq’s Kirkuk-Ceyhan Pipeline has atransportation capacity of approximately 1.2 million barrels per day but is only applicable to northern Iraqi crude oil.
Alternative transportation via overland pipelines is geographically impossible for assets in Qatar and the UAE. Major assets such as Pearl GTL, Qatar LNG, and UAE Upper Zakum have no realistic alternatives other than production shutdown during blockade periods or maritime storage in tankers.
Chapter 3: Quantitative Impact on Each Company During Blockade
| Company | Middle East Oil & Gas Production (BOE/day) | Expected Shutdown | Annual Revenue Loss (Billion USD) | Price Rise Benefits from North America etc. (Billion USD) | Net Impact (Billion USD) |
| TotaTotalEnergies | 807,000 | 680,000 | -180 | +120 | -60 |
| Shell | 400,000 | 380,000 | -100 | +180 | +80 |
| ExxonMobil | 350,000 | 350,000 | -90 | +450 | +360 |
| BP | 50,000 | 50,000 | -13 | +150 | +137 |
| ConocoPhillips | 83,000 | 83,000 | -22 | +200 | +178 |
Assuming a blockade would cause crude oil prices to rise from $80 to $200 WTI basis and natural gas prices to triple, the analysis examines impacts based on each company’s Middle East production including both oil and gas assets, incorporating gas-related assets such as Pearl GTL and Qatar LNG. Price rise benefits from each company’s non-Middle East assets are calculated as additional revenue from ExxonMobil’s Permian Basin 1.185 million BOE/day, ConocoPhillips’s North American assets 1.42 million BOE/day, BP’s North Sea and US assets, and Shell’s North Sea, Brazil, and Australia assets.
Conclusion: Assessment of Portfolio Strategy Vulnerability and Resilience
Fundamental Differences in Portfolio Vulnerability
The risk of Strait of Hormuz blockade has been a continuously recognised geopolitical risk since the Tanker War of the 1980s. However, fundamental differences exist in the portfolio strategies each oil major has built against this risk.
TotalEnergies’s strategic vulnerability stems from excessive dependence on the Middle East and North Africa region. The company’s Middle East production of 807,000 BOE per day significantly exceeds other companies, showing a high dependence rate of 30% of the total company production. This concentration level contains structural risk where a single geopolitical event could deal a fatal blow to overall company performance. While the background for adopting such a high-risk strategy included historical business foundations in the Middle East and North Africa region and expectations of high profitability, it was insufficient from a geopolitical risk management perspective.
In contrast, ExxonMobil and ConocoPhillips have built structures to enjoy maximum benefits during the Strait of Hormuz blockade through concentration on geopolitically risk-free North American assets. The scale of ExxonMobil’s Permian Basin, 1.185 million BOE per day, and ConocoPhillips’s North American assets, 1.42 million BOE per day, brings price rise benefits that far exceed losses in the Middle East.
Assessment of Strategic Policy Setting
Each company’s Middle East strategy reflects differences in recognition and response policies toward Strait of Hormuz blockade risk.
ExxonMobil’s strategy can be evaluated as “selective withdrawal and concentration.” The complete withdrawal from Iraq in January 2024 shows a strategic retreat from regions with high geopolitical risk. While the company concentrates on high-profit assets in Qatar and the UAE, it has reduced its Middle East dependence to approximately 8% of total company production through an overwhelming production base in North America. This strategy approaches an optimal solution that minimises losses during Strait of Hormuz blockade while maximising benefits from price rises.
ConocoPhillips’s “North America specialisation and Qatar limited participation” strategy has also been highly evaluated. The company has limited Middle East operations to Qatar LNG operations, suppressing Middle East dependence to 9% of the total company. This strategy secures access to North Field, the world’s largest gas field, while minimising geopolitical risk.
BP’s “cautious selective investment” strategy is noteworthy as an ongoing strategic transformation. The company maintains minimal existing Middle East assets and seeks a balance between risk and return through selective investment in future projects. Participation in the Iraq Kirkuk oil field redevelopment and the UAE Ruwais LNG project can be evaluated as strategic decisions based on careful risk assessment.
Limitations of Shell’s Diversification Strategy
Shell’s “regional diversification investment” strategy appears to have risk diversification effects at first glance, but limitations are exposed under the extreme Strait of Hormuz blockade scenario. While the company’s Middle East assets are geographically diversified, the structure where Pearl GTL and most Qatar LNG operations depend on the Strait of Hormuz remains unchanged.
The problem is that Shell’s Middle East strategy relied too heavily on the “risk reduction through diversification” theory and underestimated concentration risk at a single choke point. The 100% investment in the Pearl GTL facility and participation in multiple Qatar LNG projects appear to be diversified investments on the surface but are essentially concentrated investments in the single risk factor of the Strait of Hormuz.
Strategic Failure of TotalEnergies
TotalEnergies’s Middle East and North Africa strategy exposes insufficient recognition and inadequate response to Strait of Hormuz blockade risk. The company’s decades-old regional concentration strategy prioritises short-term revenue maximisation while neglecting long-term geopolitical risk.
The company’s 30% dependence on the Middle East and North Africa is excessive for an oil major and inappropriate concentration from a portfolio theory perspective. Business expansion in Iraq, UAE, and Oman, while successful as individual projects, was inappropriate as company-level risk management.
Strategic Lessons from Resilience Gaps
Extreme scenario analysis of Strait of Hormuz blockade clearly shows gaps in each company’s portfolio resilience. ExxonMobil and ConocoPhillips’s North America concentration strategy and BP’s cautious, selective investment strategy show high resilience against geopolitical risk. Meanwhile, TotalEnergies’s regional concentration and Shell’s superficial diversification strategies contain structural vulnerabilities.
Demonstration of Choke Point Risk Theory
This analysis exposes limitations of conventional portfolio theory. While traditional financial theory has considered geographic diversification a fundamental principle of risk reduction, physical infrastructure constraints render theory powerless in the energy industry. The single choke point of the Strait of Hormuz effectively consolidates geographically dispersed assets across multiple countries – Qatar, UAE, Iraq, and Oman – into a single risk factor.
Shell’s strategic error lay in neglecting this physical constraint and being complacent with superficial geographic diversification. Asset diversification across six countries, including Pearl GTL, QatarEnergy LNG N(4), North Field East, North Field South, UAE ADNOC Gas Processing, and Oman PDO, appears to be ideal risk diversification. However, the reality that most of these depend on a single bottleneck – a 39-kilometre-wide strait – completely nullifies the effect of diversified investment.
Redefining the Trade-off Between Profitability and Stability
Each company’s strategic choices reflect fundamentally different approaches to the trade-off between profitability and stability. TotalEnergies and Shell were attracted to high profitability rates in the Middle East and North Africa region (generally 15-25% IRR) and continued investment decisions prioritising short-term financial performance. However, when the tail risk of Strait of Hormuz blockade materialises, these high profitability rates instantly convert to massive losses.
In contrast, ExxonMobil and ConocoPhillips accept relatively low profitability rates of North American shale assets (10-15% IRR) while paying insurance premiums for geopolitical stability. However, price spikes during the blockade reveal that this “insurance premium” was the investment bringing the highest returns. ExxonMobil’s annual net benefit of $360 billion and ConocoPhillips’s $178 billion compel fundamental reconsideration of risk-adjusted return concepts.
Information Asymmetry and Strategic Decision-Making
Behind each company’s strategic choices lie information asymmetry and interpretation differences regarding geopolitical risk. TotalEnergies management may have overestimated the French government’s diplomatic influence and historical relationships with Middle Eastern countries, underestimating geopolitical risk. The company’s 30% dependence on the Middle East and North Africa indicates excessive trust in risk mitigation through political connections.
ExxonMobil’s strategic withdrawal reflects a deep understanding of US Middle East policy and positioning energy security as the top priority. The company’s decision to withdraw from Iraq and consolidate in Qatar, UAE, and Saudi Arabia is based on precise quantification of geopolitical risk and careful assessment of each country’s political stability.
Structural Transformation of Shareholder Value Creation Models
The Strait of Hormuz blockade scenario structurally changes oil majors’ shareholder value creation models. While conventional value creation centres on investment in high-profitability assets and production expansion, the manifestation of geopolitical risk makes the “locational value” of assets a decisive factor.
For ExxonMobil shareholders, the company’s Permian Basin assets are not merely crude oil production assets but strategic assets containing geopolitical option value. Price spikes during the Strait of Hormuz blockade manifest this hidden value, bringing enormous returns to shareholders. Meanwhile, TotalEnergies shareholders participate in a Russian roulette-like investment structure where they enjoy premiums. The company’s Middle East assets generate high profits but suffer catastrophic losses the moment geopolitical risk materialises.
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