The disruption to the liquefied natural gas market caused by the Iran war and its effects emerged as a key theme on the first day of a major energy conference in Texas.
The effective closure of the Strait of Hormuz has choked the global energy supply, leading the International Energy Agency to deliver a framework for releasing emergency oil reserves to deliver more supplies to the market.
The disruption is likely to most affect buyers in Asia, which are heavily reliant on trade through the Strait of Hormuz.
“Almost 80 per cent of natural gas passing through the Strait of Hormuz is exported to Asian countries. So Asian countries are affected by this blockage of Hormuz very severely,” Takehiko Matsuo, Japan's vice minister for international affairs, told a panel at CERAWeek in Houston.
He added Japan has about three weeks of gas reserves left.
Iran has attacked on key energy sites across the Middle East, having a significant impact on Qatar, which accounts for about one-fifth of global LNG supply.
QatarEnergy's chief executive said a recent strike against its Ras Laffan plant wiped out 17 per cent of Qatar's LNG export capacity. Doha could face up to $20 billion in losses annually, and it could take up to five years to repair.
The attack forced the state-run energy company to declare force majeure, with buyers in Europe and Asia most affected.
Ira Joseph, global fellow at the Centre on Global Energy Policy, said Qatar cutting its LNG export capacity is “massively disruptive” for Asian buyers, and this might lead to a “windfall” for American exporters who could expand their LNG projects.
Meanwhile, countries previously relying on LNG would either have to seek out other sources of energy such as oil or coal, or somehow cut demand.
“If you lose 77 million tonnes per year of Qatari supply, you'll have to lose 77 million tonnes of LNG demand,” Mr Joseph said.
The disruption has drawn comparisons to Russia's 2022 invasion of Ukraine, when Moscow cut 80 billion cubic metres of pipeline gas supplies to Europe. The episode led Europe to reduce its reliance on Russian gas, instead turning to the US as its chief LNG supplier.
The US became the world's biggest LNG exporter in 2023.
Anatol Feygin, executive vice president at Cheniere, said that unlike in 2022, when Russia's invasion of Ukraine bit into LNG supply gradually, “as opposed to the guillotine issue” that has played out in the Middle East in recent weeks.
“The US production function, well north of 110 BCF a day, rose to the challenge of growing power generation demand and LNG exports, and US LNG continues to rise to the challenge of meeting market disruptions, and that in the tragedy of war,” he told a panel.
US natural gas futures fell more than 6 per cent on Monday, while oil prices fell about 11 per cent, after President Donald Trump announced talks between Washington and Tehran.
Join our Q&A from the energy industry's major summit, CERAWeek, as the Iran war shocks global markets. It takes place on Wednesday, March 25, at 5pm UAE time. Register for free here
