Global insurers had just shaken off the ESG push from earlier this decade when the Middle East conflict upended oil and gas upstream project coverage.
The world's lowest-cost oil and gas producing region became a war zone at the end of February, with war-risk premiums and oil and gas drilling and construction projects facing either delays or significant cost inflation.
Five months of uncertainties about new oil and gas projects in the Middle East have prompted insurance giants to turn to underwriting drilling and project construction ventures outside the prolific but highly volatile region.
And the race is on for attracting insurance business in oil and gas basins less exposed to geopolitical flare-ups. Insurers are slashing premiums on upstream energy insurance for projects not depending on the on-and-off closed Strait of Hormuz and other chokepoints in the Middle East.
Insurers Compete for Underwriting Projects Outside Middle East
Premiums for upstream energy insurance outside the Middle East have tumbled by about 25% year to date, insurance brokers told the Financial Times.
In some cases, some insurers have slashed the premiums by as much as 50%, even at a short-term loss, according to industry insiders who spoke to FT.
The reason is clear—as oil and gas companies boost exposure to basins and projects outside the Middle East, insurers are competing for a market share of the now-shrunk global pool of upstream developments that are not in an active war zone.
"Upstream [energy] has been a very profitable sector for the market for a number of years," Rupert Mackenzie, a natural resources insurance broker at WTW, told FT.
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"The view from insurers is, this is a sector which they would like to have ongoing exposure," the broker added.
Mackenzie's colleagues at WTW said in an April report, Energy Market Review 2026, that "ratings are 'through the floor'".
This year, "15–20% reductions are available for core upstream risks with clean loss histories and substantial premium on the slip, with 40%+ reductions still observed in exceptional cases," WTW said in its annual report published a month and a half after the Iran war began.
"The overarching pricing trend is unmistakable: even after a decade of softening, the market is still finding new downward territory," according to WTW.
The Iran war and the Middle East becoming an active war zone have pushed the world's biggest international oil and gas firms to pursue upstream projects away from the region, Mackenzie told FT.
Big Oil Firms Double Down on Exploration Far From Middle East
Amid the Middle East conflict, Big Oil firms are trying to minimize losses on curtailed production and barrels not lifted because of the Strait of Hormuz crisis.
And they are betting on high-impact exploration and upstream projects in hotspots such as Guyana, Suriname, Namibia, Brazil, Turkey, and Cyprus, to name a few.
Exxon and Chevron are doubling down on the billions of barrels of crude oil discovered offshore Guyana. Separately, Chevron is boosting its business in Venezuela, where the Trump Administration hopes U.S. firms would increase production and oil exports to the United States.
Exxon, for its part, expects to invest billions of U.S. dollars in Nigeria's deepwater oil and gas fields. Exxon is progressing the $7-$8 billion billion-barrel Owowo deepwater project offshore Nigeria, "looking into an FID as early as next year," Hunter Farris, Senior Vice President – Deepwater for ExxonMobil Upstream Company, said in April.
That's only one of Exxon's new projects in Africa's top oil producer, which has raised its crude oil sales in Asia in recent months as refiners reel from the shock supply loss from the Middle East.
ExxonMobil's subsidiary in Nigeria and its partners earlier this month committed $1 billion to the on-block activities for the Usan Infill Project in OML 138. The project will unlock 40,000 additional barrels of crude oil in 18 months. It also "signifies renewed interest and hope in Nigeria being Esso's first major deep water project in the country since 2016," the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) said in early July.
Elsewhere, BP in April bought into three offshore exploration blocks in Namibia, one of the hottest exploration destinations, where Shell, TotalEnergies, and Galp have already made large oil discoveries.
TotalEnergies in April signed a Memorandum of Understanding with Türkiye Petrolleri Anonim Ortaklığı (TPAO) to evaluate exploration opportunities in the Black Sea region and internationally.
Companies are also increasingly looking at shale opportunities outside the U.S., with Argentina, China, Turkey, and Australia drawing interest for potential development of onshore resources far away from the Middle East.
Oil and gas exploration has created a lot of value for the industry in recent years.
The industry created $54 billion of value after deducting $97 billion of spend on exploration from 2021 to 2025, under a long-term Brent price of $65 per barrel, an analysis by energy consultancy Wood Mackenzie showed in April.
At $85 per barrel Brent, value creation more than doubles to $120 billion, according to WoodMac.
By Tsvetana Paraskova for Oilprice.com
