Qatar's Ras Laffan, the world's largest liquefied natural gas (LNG) refinery, will not be fully back online until the end of August at the earliest, with a fifth of its capacity gone for years, energy consultancy Wood Mackenzie said.
Iranian missile strikes last month destroyed parts of the complex that supplies one fifth of the world's super-chilled fuel. QatarEnergy will not be able to fully restart all of its 12 operable trains before the end of August, assuming a resumption in May, the consultancy said in a note.
Iranian strikes damaged Trains 4 and 6, removing 12.8 million tonnes a year (mtpa), equivalent to about 17 per cent of Qatar's LNG exports from the market.
Sustained damage
QatarEnergy declared long-term force majeure on contracts with buyers in China, South Korea, Italy and Belgium. The company’s chief executive, Saad Al Kaabi, put annual lost revenue at $20 billion and estimated repairs would take three to five years.
QatarEnergy requires replacement gas turbines to power the refrigeration compressors. However, only three manufacturers worldwide produce the required equipment, with an expected delivery delay of two to four years.
Of the remaining capacity, the North site, with 41 mtpa, could be back within a month of the restart. The soonest the South site, which took the direct hits, can be restarted is by the end of summer. After its two destroyed trains were written off, the South site's capacity dropped from 36 mtpa to 24 mtpa, a loss that will not be recovered for years.
Satellite imagery shows two mega-trains at Ras Laffan's North site still have heat signatures – by which their surface temperature relative to the surroundings is visible – suggesting they may be able to restart fully relatively quickly.
Ceasefire recovery
However, WoodMackenzie notes that despite the two-week ceasefire agreed between the US and Iran on April 8, even partial recovery remains fragile.
“The ceasefire means it may be possible for the 14 trapped laden LNG cargoes in the Gulf to exit the Strait of Hormuz and provide some relief to the global gas market,” said Tom Marzec-Manser, head of Europe Gas and LNG at Wood Mackenzie.
“But for there to be a real structural change in supply, the Ras Laffan site in Qatar would need to restart its 12 operable trains. It is unclear if QatarEnergy would consider doing this during a ceasefire, however.”
Qatar is reported to be mobilising engineers and workers ahead of a planned restart, with some production potentially beginning within days. Chiyoda, the Japanese engineering firm working on Qatar’s planned North Field East expansion, said it is also considering resuming on-site construction work following the ceasefire.
“If ballast LNG vessels were able to enter the Gulf, loading would also be possible immediately for more than 10 vessels, even if LNG production at Ras Laffan has not yet resumed,” Mr Marzec-Manser said. “There have been a number of loadings for delivery to Kuwait while the conflict has been ongoing.”
Dangerous crossings
Only two days before the ceasefire, two Qatari LNG tankers, the Rasheeda and Al Daayen, aborted an attempted Hormuz crossing after failing to secure clearance from Iranian authorities, dashing hopes of the first LNG shipments out of the Gulf since the war began. Iran designates a list of “friendly” nations, including China, India, Pakistan and Russia, whose ships it permits to transit the waterway. Qatar has yet to make that list.
New supply
Qatar’s top buyers, mostly in Asia, are watching developments closely. Around 80 per cent of Qatari LNG goes to the region, with China, South Korea, India and Pakistan the main buyers.
The UAE and Qatar together account for 99 per cent of Pakistan's LNG imports, 72 per cent of Bangladesh's and 53 per cent of India’s, shipping intelligence firm Kpler says.
The supply crunch has already forced emergency measures across South Asia. India has cut gas allocations to industry, Pakistan has introduced compressed workweeks and school closures, and Bangladesh has slashed government fuel allocations by 30 per cent and shifted school lessons online.
Many are now turning to Russian gas to meet supply gaps. the government in Moscow has been offering LNG from its under-sanction Arctic LNG 2 project to Asian buyers at discounts of up to 40 per cent to spot prices. The cargoes are routed via Chinese and Russian intermediaries with paperwork allegedly showing Omani and Nigerian origins. Some buyers, including Japan, have already switched back to coal.
