New york: As the US-Israel conflict with Iran leads to disruptions in Qatar's liquefied natural gas (LNG) production, global energy markets are experiencing significant turmoil, with analysts indicating that American and other Western companies are poised to be the biggest beneficiaries of the crisis.
According to Anadolu Agency, Qatar is responsible for approximately 20% of the global LNG exports. Any extended halt in production or shipping through the critical Strait of Hormuz could compel importers in Asia and Europe to seek alternative suppliers, particularly from the US, Europe, and Australia.
The disruption has already sent ripples through gas markets worldwide. European benchmark prices have soared after QatarEnergy ceased operations at two major facilities, sparking fears that one of the world's key LNG suppliers might be temporarily incapacitated.
Experts identify American firms like ExxonMobil, Chevron, Cheniere, and Venture Global as potential beneficiaries, alongside major European companies such as Shell and TotalEnergies. Michael Sabel, CEO of Venture Global LNG, noted during an earnings call that they likely have the largest number of available cargoes in the market.
Following news of the disruption, shares of Cheniere Energy, the leading US LNG exporter, increased by approximately 5.5%, indicating investor optimism that American exporters could benefit from a tighter global supply.
Industry analysts suggest that American LNG producers are well-positioned to fill the gap if Qatari shipments remain restricted. Ed Cox, LNG markets editor at Independent Commodity Intelligence Services, mentioned that there is potential for additional supply from existing plants due to some flexibility in nameplate capacity.
Other exporters are also expected to capitalize on the supply shock. Companies such as Sempra Infrastructure and Freeport LNG, located in Texas and Louisiana respectively, have emerged as significant suppliers to global markets in recent years.
In the Asia-Pacific region, producers like Australian firm Woodside Energy and Chevron could help address supply shortages for Asian buyers, while global energy majors with trading portfolios might redirect cargoes to the most lucrative markets.
The LNG supply disruption has sparked broader concerns about the security of global LNG supply chains, given that most Qatari cargoes must pass through the Strait of Hormuz, a vital energy corridor. Cox emphasized the critical role of Qatar and the UAE, which collectively supply 20% of the world's LNG, in maintaining market stability.
Gas prices have already seen significant increases, with European benchmark prices jumping from around £32 ($37.3) per megawatt-hour to over £50, and Asian LNG spot prices rising even more sharply. If the outage persists, prices could escalate further, potentially reaching £80 per megawatt-hour in Europe if the disruption lasts for 12 weeks.
Emerging Asian economies heavily reliant on imported LNG, such as India, Pakistan, and Bangladesh, are already feeling the impact of the disruption, with downstream gas curtailments reported. Additionally, Egypt has issued tenders for LNG cargoes to compensate for the lost regional supply.
Europe is particularly vulnerable due to LNG accounting for roughly 40% of the region's gas supply after the significant reduction in Russian pipeline imports following the Ukraine war. Jason Feer, global head of business intelligence at Poten and Partners, warned that extended disruptions in Qatari exports would lead to a dramatic market tightening, forcing LNG buyers to compete for limited spot cargoes.
Despite the opportunities for other exporters, analysts caution that completely replacing Qatar's LNG supply in the short term will be challenging. Most global LNG production facilities are already operating near capacity, and a significant portion of cargoes are tied to long-term contracts.
Energy analyst Saul Kavonic from MST Marquee noted that the disruption could have a more profound impact on energy markets than previous supply shocks. He emphasized that a prolonged disruption of Qatar LNG would significantly affect Asia and exacerbate the situation by also impacting oil supplies, a gas substitute.
The supply crunch is likely to intensify competition between Europe and Asia for available cargoes, with Kavonic warning that gas prices could double again as both regions strive to maintain their energy supplies.
The crisis may also prompt importing countries to diversify their LNG sources away from the Middle East, underscoring the importance of diversification in the wake of the Iran conflict. However, the tightening market could also be highly profitable for producers with available cargoes, as high prices benefit US exports.