Source: Energy News
Eamon Rood
International Energy Agency regional co-operation chief Sue-Ern Tan says the closure of the Strait of Hormuz has put resilience, diversification and domestic supply ahead of price in global energy strategy.
The strait’s closure in the wake of the United States-Iran war has permanently changed global energy flows and with it, how governments and companies assess energy security, she said in Wellington today.
Customers can no longer base procurement on price alone without the world’s most important trade channel operating – not just for crude oil and liquefied natural gas, but for everything from helium to fertiliser too.
Even if it reopens tomorrow, it’s likely to shut again in another geopolitical crisis, she says.
Supplier credibility, transport routes and the reliability of delivery have become central considerations, even when resilience carried an additional cost.
“If you had a supplier that comes to you and sells you the product for $2 and another supplier who sells you the product for $4, prior to the conflict, your most natural choice would have been pick the supplier who sells you the product for $3,” she says.
But now a bigger part of the equation is who is the more credible supplier who can actually deliver it on time and as needed, even at greater cost.
“It may be worth paying an extra dollar as an energy-risk premium if that secures reliable supply,” she says.
“Over the longer term, that can be the better investment.”
Risk business
The issue isn’t isolated to the Strait of Hormuz, she says. Iran has retaliated by striking major refineries across the Middle East and Ukraine is attacking Russian refineries as part of its strategy to repel that country’s invasion.
Tan says that even if Hormuz reopens tomorrow, the damage done to those facilities will take years to repair and there’s the possibility they won’t regain their original capacities.
United States President Donald Trump recently lifted sanctions on Russian diesel in order to shore up global supply. But Tan says that could only ever add limited volumes – even before Ukraine began striking refineries.
Countries like Saudi Arabia have circumvented Hormuz, to an extent, through the massive east-west oil pipeline. But that hasn’t restored supply levels, and in any case, isn’t an option for liquefied natural gas, which has to travel by ship, and has seen its global centre of production in Qatar hit hard.
The crisis also demonstrates the “weaponisation of energy” as a geopolitical tool, Tan says, forcing world governments and companies to think harder about security of supply for energy and other critical goods.
A flare-up in the Strait of Malacca between China and Taiwan could cause similar, if not worse, disruption.
“Starting to look through how those things play out is something that is on a lot of governments’ minds,” she said.
New normal
Tan was speaking on global energy trends at an event hosted by the Business New Zealand Energy Council in Wellington this morning.
She is the head of the IEA Regional Cooperation Centre, established in Singapore at the end of 2024. The office is the first outside of the IEA’s Paris headquarters and provides policy guidance, technical assistance, training and capacity building.
Before joining the IEA, Tan worked at Shell in senior climate and energy roles, in London and The Hague and later in Singapore leading policy and advocacy.
She practised as a lawyer, worked as ministerial adviser on energy in the Australian Government and was the deputy chief executive of a minerals trade association in Australia.
She says the global energy landscape cannot simply return to its pre-war state, even if the Strait of Hormuz reopened. Once the route had been closed, governments and companies had to start planning for the possibility it could happen again.
That has made diversification – not just of energy sources but also supply points – the central principle of energy security. Countries needed to assess their suppliers, shipping routes, alternative delivery options and dependence on individual fuels.
The shift also accelerates what the IEA describes as the Age of Electricity and opportunities to electrify transport and industry, although costs and business models remain challenging.
Greater domestic production offers another layer of protection. Tan says New Zealand has provided useful lessons in relying more heavily on energy resources available within national borders, particularly renewables.
Something other countries can learn from is New Zealand’s drive towards renewables and electrification, she says.
But there are still choke points to consider, especially around manufacturing.
The vast majority of the world’s solar panels are made in China, for example, which is also a major supplier of things like wind turbines and hydrogen electrolysers.
The energy crisis has shown that relying on one source of supply is a major risk, Tan says.
The IEA is encouraging governments – particularly in Asia where Tan is based – to look at shoring up domestic manufacturing capacity to alleviate that risk.
“We’re trying to encourage them to think that way, to have that manufacturing onshore within Southeast Asia, because again, that’s part of having more of your security around the energy-related infrastructure,” Tan said.