Analysts say East Asia could see hikes in energy costs after an Iranian strike wrecked Qatari LNG infrastructure that met 20 percent of the world’s demand.
Iran’s de facto closure of the Strait of Hormuz and partial destruction of Qatar’s liquified natural gas (LNG) infrastructure on March 18 will have a dramatic global impact, primarily in East Asia, but won’t affect North American natural gas prices, market analysts say.
“The price of natural gas in the United States has not been affected because the [domestic] market is ‘shielded’ from international price spikes,” said Ken Medlock, an energy market researcher at Rice University’s Baker Institute for Public Policy.
In fact, natural gas prices in the United States and Canada are expected to decline as winter fades, he told The Epoch Times.
The United States is the world’s largest LNG exporter, eclipsing Qatar and Australia in 2022, with domestic producers now supplying 25 percent of global consumption, data from the U.S. Energy Information Administration show. Nearly 70 percent is shipped to buyers in Europe, with Japanese and South Korean consumers increasing imports over the past few years.
Qatar is the world’s second-largest LNG exporter, supplying nearly 20 percent of global demand. About 90 percent of Qatari LNG is purchased by buyers in Asia, including China, South Korea, Japan, India, and Pakistan.
Iranian attacks since March 4 had already knocked out 17 percent of the Gulf state’s LNG export capacity before the March 18 missile strike caused massive damage to the Ras Laffan Industrial City Pearl GTL (gas-to-liquids) plant and destroyed at least two of 14 “trains,” sequential components that purify and cool natural gas to turn it into liquid for transport.
QatarEnergy CEO Saad al-Kaabi said on March 19 that the damage will take years to repair, prompting the company to declare “force majeure” on contracts for up to five years. Force majeure means an unexpected event, such as a war, a natural disaster, or a government action that prevents the fulfillment of a contract.
Alex Munton, director of the Washington-based Rapidan Energy Group Global Gas and LNG Service, told The Epoch Times that the five-year estimate implies infrastructure must be rebuilt rather than repaired, meaning that even when shipping traffic resumes in the Strait of Hormuz, LNG volume leaving the Persian Gulf will be but a dribble of what it was in February for at least several years.
The shock is comparable in some respects to the daily loss of 10 million barrels of crude oil hemmed inside the Persian Gulf by the closure of the strait—25 percent of global consumption—but “there are differences” in LNG and petroleum markets, he said.
By John Haughey
