French oil giant TotalEnergies is moving discounted Middle Eastern crude through the Strait of Hormuz at a profit, even as higher shipping costs and security risks continue to restrict traffic through the waterway, CEO Patrick Pouyanne said at a Norwegian energy conference on Monday, Reuters reported.
“We are today probably the largest trader of oil from Iraq or from Qatar … and I can tell you that today crude oil is moving through the Strait of Hormuz very quietly, not publicly,” Pouyanne said at a Norwegian energy conference.
Producers are offering crude at $50-$60 per barrel, compared with Brent futures above $90 on Monday, as they seek buyers for barrels trapped by the conflict, Pouyanne said.
Shipping a very large crude carrier (VLCC) through Hormuz and back costs around $20 million, adding about $10 per barrel for a vessel carrying 2 million barrels, he added. The steep crude discounts more than cover that additional cost.
Refined products face a different picture. Smaller vessels push the additional transport cost to around $50 per barrel, making shipments uneconomic, according to Pouyanne.
“That’s why you don’t have a single tanker of products moving out of Hormuz … So you have today a lack of oil products. That’s why you have a bearish crude oil market and a very bullish products market, which is very strange,” he said.
Despite continuing crude shipments, TotalEnergies plans to invest in routes that reduce dependence on Hormuz. Pouyanne said the company will become a partner in a pipeline running from Baghdad to Syria and invest in doubling the Fujairah pipeline in Abu Dhabi.
Notably, the existing Habshan-Fujairah pipeline can transport up to 1.8 million barrels per day to the Gulf of Oman outside Hormuz.
The company’s push for alternative routes follows disruptions to its Middle East operations shortly after the Iran war began. In March, TotalEnergies said production in Qatar, Iraq and offshore UAE was either halted or being shut down, affecting around 15% of its total production. Onshore UAE output of about 210,000 bbl/d remained unaffected.
