It’s hard not to be absorbed by activities unfolding in the Middle East. Russia’s move to deploy forces into Syria in support of the Alawite regime of president Bashar al-Assad has clearly raised tensions in the region. Notwithstanding attempts to “deconflict” the movements of the various military powers in this multisided war, the unforeseen could—and likely will—happen.

Like a protracted “war of attrition,” the various conflicts in the Middle East are collectively having an impact in terms of gradually wearing down the energy industry’s global capacity. It’s not just in Syria, of course; there are at least four effective wars being waged in the Middle East.

In Syria itself, what once was around 90,000 barrels per day (bbl/d) of capacity has almost dwindled to nothing, due to a combination of “technical ineptitude” and, more destructively, the military operations of ISIS that include torching the country’s oilfields and refineries, according to Amy Myers Jaffee, executive director, energy and sustainability, at the University of California, Davis.

“They’ve taken 90,000 bbl/d of production in Syria, and they’ve made it 5,000 bbl/d,” she said.

With wars being waged in Syria, Libya, Yemen and around smaller eastern oilfields in Iraq, Jaffee estimated more than 1.9 million barrels per day (MMbbl/d) of production is currently being disrupted, not all of which is likely to come back. Some operators of fields in Libya have told her the fields are “irreparably” damaged, she noted.

In Iran, Russia’s partner-in-arms in Syria, some of the country’s very large, gas-drive oilfields are “likely much more damaged than assumed,” according to Jaffee, and less likely to hit the higher estimates for production that some have targeted when sanctions are lifted. Jaffee said she was “a little skeptical” of the idea of “resting” oilfields by stopping gas injection during sanctions. “I’ve talked to technical people,” she said. “If you stop injecting the gas, you lose the pressure.”

Meanwhile, while Iran awaits the lifting of sanctions, Russia is struggling to access new capital against a backdrop of Western sanctions following another geopolitical event—its annexation of Crimea last year.

An example is financing needed for the giant arctic Yamal LNG project, with a price tag of $27 billion, whose lead partner, OAO Novatek, has been hit by U.S. sanctions. With most Western financing now off limits, the partners have turned to Chinese state banks for $12 billion in loans. A Reuters article in early September suggested financing terms were expected—but had not yet materialized—by month end.

Yamal LNG is part of Russian president Vladimir Putin’s plan to reduce Russia’s dependence on natural gas exports to Europe. Instead, more exports are to be targeted to Asia, helping strengthen Russian ties with China.

Similarly, there are doubts as to the ability to finance the Nord Stream 2 project, a partnership led by Russian gas giant Gazprom. Plans call for adding a third and fourth line to the existing Nord Stream, an undersea pipeline carrying gas from the Baltic coast of Russia to the former East Germany.

“The original Nord Stream was funded by project finance. We believe raising multibillion-dollar project financing for Nord Stream 2 in the capital markets would probably be much harder now,” said credit ratings agency Fitch, citing Western sanctions that have “significantly hindered international funding to Russian corporations, even those not directly sanctioned.”

With Gazprom holding a 51% interest in the project, it would have to come up with more than $5 billion in funding if project finance were unavailable. But in the weak gas price environment, “Gazprom would not be able to fund its capex share from internally generated funds,” said Fitch.

In this environment of heightened geopolitical tensions—whether in the Middle East or elsewhere—the cumulative effect of such project delays and disruptions gradually erodes an already narrow margin of global spare capacity.

Sources differ on estimates of spare capacity, but within a tight range. Tudor, Pickering, Holt & Co. puts it at 2.5 MMbbl/d, assuming an incremental 500,000 bbl/d for Iran as sanctions are lifted. Simmons & Co. International says it is an “exceptionally thin” margin of 2.2 MMbbl/d.

Traditionally, before headlines blared about the “glut” of oil, there was a tendency for oil prices to move higher as spare capacity narrowed.

As global events unfold in this less orderly world, it may be worth remembering that when capacity in the oil industry is less, opportunities are often more.

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