Iran warns of potential retaliation on Israeli gas fields, oil refineries

Top Iranian military officials said Oct. 4 that Tehran would target Israel’s gas fields, oil refineries and power plants if attacked, stepping up its warnings while energy markets continue to rally on the regional tensions.

"We have exercised restraint and patience in the past, but we are ready to deliver a precise and devastating strike at the appropriate time," Major General Abdolrahim Mousavi, commander in chief of the Iranian army, said in an interview with Lebanese media outlet Al-Mayadeen.

In separate comments to Al-Mayadeen, Brigadier General Ali Fadavi, deputy chief of the Islamic Revolutionary Guard Corps, said Iran would have the capability to strike all of Israel’s energy facilities simultaneously.

“If the occupying entity makes a mistake, we will target all of its energy sources, including power stations, refineries and gas fields.”

The comments come a day after US President Joe Biden said Washington was “discussing” with Israel a potential strike on Iranian oil facilities.

Energy markets have been on high alert after Iran launched a volley of missiles on Israel on Oct. 1 in retaliation for the killing of Hezbollah leader Hassan Nasrallah and IRGC Deputy Commander Abbas Nilforooshan in Lebanon.

Platts, a part of S&P Global Commodity Insights, assessed November JKM spot LNG cargoes at $13.23/MMBtu on Oct. 4, up 3.89% from the previous day.

Platts Dubai, the main benchmark for Middle East crude, meanwhile, was assessed at $77.88/b, up 4.62% on the day.

Israel infrastructure

Israel has two refineries -- the 197,000 b/d Haifa plant owned by Bazan Group, and the Paz Group-owned 110,000 b/d Ashdod refinery -- and is a significant natural gas producer, with output having reached a record high of 24.7 Bcm in 2023, according to Israeli energy ministry data published in May.

Gas production, which comes from three offshore fields – Tamar, Leviathan and Karish -- rose further in the first half of 2024, and was up by 7% year on year at 13.1 Bcm, suggesting it is on track for record production in 2024.

Of Israel's 2023 gas output, some 13.1 Bcm was supplied to the local market, a year-on-year increase of 3.5%, while the remaining 11.6 Bcm was exported to Egypt and Jordan, up 25%. Egypt in particular is reliant on gas imports from Israel to meet domestic demand.

Crude impacts

As for Iran, it is a major oil producer and member of OPEC, with its crude output averaging 3.18 million b/d in August, according to the latest Platts OPEC+ survey by Commodity Insights.

Iran also has one of the largest refining sectors in the Middle East, with about 2.4 million b/d of capacity in 2023 spread across 10 main sites. Its three biggest refineries are the 370,000 b/d Isfahan plant, the 360,000 b/d Abadan refinery, and the 320,000 b/d Bandar Abbas site.

Iran’s three major crude export and storage terminals are at Kharg Island, Sirri Island and Lavan Island, while the Jask terminal is strategically located on the Gulf of Oman, outside the Strait of Hormuz chokepoint.

Regional risks of a wider conflagration have put Iran’s neighbors on high alert. The Persian Gulf region is a vital source for around a fifth of global oil exports, as well as Qatari LNG.

Foreign ministers from the Gulf Cooperation Council met Oct. 3 in Doha with Iranian counterpart Abbas Araghchi in an attempt to tamp down tensions.