Energy: From the market shock to the re-prioritization of projects and capital
By Marin Bourgeois, Senior Analyst, IVO Capital Partners
Summary: – Ormuz is not just a price shock: it is a supply security stress test. When geopolitical risk materializes, decision-makers think about resilience, leading to a re-prioritization of projects and capital redistribution. The original risk may permanently influence investment decisions. – Liquefied natural gas (LNG): The crisis does not automatically trigger a wave of greenfield LNG projects; it re-prioritizes projects. Winners are executable developments linked to existing infrastructure in perceived neutral or diversifying geographies, while long and complex projects are hindered by execution risk. – Oil: Ormuz’s impact and shareholder pressure may reopen an exploration cycle outside the Middle East to secure project portfolios beyond 2030, particularly in the Atlantic basin. Introduction: The current crisis goes beyond a geopolitical episode, combining logistical disruptions, military risk, and energy tensions, reminiscent of past crises from 1970s oil shocks to the 2022 gas crisis.
LNG: Where the crisis becomes structural, transforming from a flow shock to an asset shock The LNG segment is structurally impacted by the crisis, transitioning from a flow shock to an asset shock with damaged liquefaction infrastructure causing a prolonged export capacity reduction. Market concentration risks highlighted, favoring projects in perceived stable geographies. Attention to the winners and the filter effect the crisis has on project developments.
Oil: Distinguishing short-term redistribution from long-term reconfiguration Oil’s impact differs from LNG’s, with logistical challenges impacting production but mitigated by flexible mechanisms. Winners short-term include US and international shale, while long-term focus shifts to secure and cost-effective hubs offering logistical resilience. Investors may look towards the Atlantic basin for future growth opportunities.
Renewables amidst the crisis The crisis may benefit renewables as gas and coal price hikes draw attention to their competitive electricity production costs. Long-term investment and project viability in renewables may increase, particularly amid supply security concerns. Positioning of IVO EM Corporate Debt Fund The fund aims to capture emerging market dynamics and adapt to market shifts. Positioned to benefit from the security of supply re-rating through assets outside the Middle East, including LNG infrastructure and gas producers. Exposure to FLNG infrastructure and African gas monetization options, as well as offshore production growth in Brazil and Guyana, emphasizing supply chain actors with visibility on projects up to 2030.
