TotalEnergies Finds Success in Discounted Oil Transport Through Strait of Hormuz

French oil major TotalEnergies is successfully transporting discounted oil through the Strait of Hormuz, despite higher transport costs. CEO Patrick Pouyanne stated that steep discounts from crude producers are offsetting these increased costs.

The Strait of Hormuz was previously a key transit route for 20% of global oil and LNG supplies but has been paralyzed due to threats of bombing and mines during the U.S.-Israeli war with Iran. However, Pouyanne said that the route remains profitable for those who can secure ship owners willing to cross the strait.

The crude oil is being sold at a discount of $30 below Brent prices, which are currently above $90 a barrel. This means that producers are desperate to push their oil into the market and are offering deep discounts. Pouyanne estimated that it costs around $20 million to move a very large crude carrier (VLCC) through the strait and back, which translates to an extra $10 per barrel.

TotalEnergies plans to invest in alternative routes despite this profitable arrangement. The company will partner with the pipeline moving from Baghdad to Syria and invest in doubling the Fujairah pipeline in Abu Dhabi, which has a capacity of 1.8 million barrels per day.