Big Oil executives warned on Tuesday that damage to Qatar's liquefied natural gas (LNG) supplies could send shocks throughout global energy markets, even as their companies' shares surged on the back of $100-a-barrel crude.
An Iranian attack on Ras Laffan Industrial City last week effectively wiped out 17 per cent of Qatar's LNG export capacity. The state-run QatarEnergy declared force majeure on Tuesday on its LNG contracts with Belgium, China, Italy and South Korea.
While Qatar's LNG production halt is set to severely disrupt supply flows to Asia, Shell chief executive Wael Sawan warned the Iran war would lead to broader “ripple effects” in global energy markets.
“We see, of course, South Asia first to get the brunt. That's moved to South-East Asia, North-East Asia, and then more so into Europe as we get into April,” Mr Sawan told those attending CERAWeek in Houston, Texas.
Shell has a 30 per cent interest in QatarEnergy LNG. Chief executive Saad Al Kaabi has warned it could take up to five years to rebuild the reduced capacity.
Subsequently, Shell also declared force majeure on its LNG supply contracts for cargoes sourced from QatarEnergy, Reuters reported. Mr Sawan said the Anglo-Dutch major's Pearl gas-to-liquids centre was safe.
Shares in the company have risen by about 11 per cent since the Iran war began on February 28, despite concerns over attacks on its operations in Qatar.
Others have seen their shares increase as well, as recent estimates from Jeffries and Rystad Energy anticipate that major US oil companies could see a windfall of about $63.4 billion if crude prices continue to hover around $100 a barrel.
Oil prices were edging higher on Tuesday, with Brent crude trading 2.59 per cent higher at $102.5 a barrel, after reaching as high as $119 a barrel last week on fears of supply chain disruptions caused by the effective closure of the Strait of Hormuz.
Shares in Chevron have risen more than 11 per cent since before the war, while ExxonMobil's shares rose by more than 8 per cent. The company's president of integrated gas, Cedric Cremers, on Monday said Shell was concerned about the impact the Iran war would have on the long-term confidence of LNG supplies.
Shares in ConocoPhillips have risen more than 15 per cent. ConocoPhillips is a vital partner of QatarEnergy and holds an interest in a large-scale LNG liquefaction and export project in Ras Laffan.
Chief executive Ryan Lance said the company was in discussions with the Trump administration to receive extra protection around its assets.
Anatol Feygin, executive vice president at the Houston LNG company Cheniere, on Monday described the cut-off of LNG supply as a “guillotine issue”.
Mr Lance, like other top energy executives this week, said his company was fighting with the supply constraints that the Iran war was placing on markets and the economy.
“You just can't take eight to 10 million barrels a day of oil and 20 per cent or so of the LNG market off the world stage without having some significant regressions,” he said. “I think we're all trying to assess what the long-term implications are.”
