Since February, the world has asked the same question about the Arabian Gulf: can hydrocarbon supplies continue to reach international markets?
It is an understandable question. Around 20 per cent of global liquefied natural gas trade and about 20 million barrels of oil a day have historically moved through the Strait of Hormuz, and for Qatari and Emirati LNG, there is no route to market that avoids it.
But it is now the wrong question. The one that matters more is being answered quietly in Seoul, Tokyo, Delhi and Frankfurt, by buyers deciding how much they want to depend on gas at all.
Trust may sound intangible, but its erosion is visible in the data. EU gas demand last year was roughly 16 per cent below its average in the five years before the war in Ukraine, while industrial consumption never fully recovered even after wholesale prices retreated from their 2022 extremes. In Asia, Europe’s scramble for cargoes at the time priced out more price-sensitive buyers and encouraged governments to reconsider their exposure to imported gas.
The current disruption makes that concern far more acute. Damage at Ras Laffan removed 12.8 million tonnes a year of Qatari export capacity, around 17 per cent of the total, with repairs expected to take three to five years. Force majeure has been extended repeatedly, and cancellations for some buyers now run into November.
Buyers have responded through coal switching, industrial curtailment and, where possible, accelerated nuclear restarts. These began as emergency measures. Repeated often enough, they become the foundations of a different long-term energy strategy.
This is how a trust deficit becomes demand destruction. The first response to a crisis is to purchase less gas. The second is to design an energy system that needs less gas.
That is the exposure the Gulf now carries. It will not be closed by proving the region can still produce, but by how producers behave while normal systems are broken.
Some of that behaviour is already visible. QatarEnergy is reported to have bought 33 spot cargoes from the US by the end of July, against four in the whole of last year, to cover Asian customers it cannot supply itself. More recent reports indicate its trading arm is seeking to contract 2 million to 3 million tonnes a year of US LNG out to 2031.
Aluminium Bahrain, having declared force majeure and cut production, was within weeks moving between 40 per cent and 60 per cent of its exports roughly 1,400km overland to Jeddah, with alumina support from Saudi producer Ma’aden. Its chief executive said this month that output was back to around 80 per cent of its prewar level.
Saudi Arabia pushed its East-West pipeline to its maximum capacity of 7 million barrels a day in the spring to move crude to the Red Sea and away from Hormuz. When drones shut the line this month, Aramco was reported within days to be building a bypass to restore half its capacity.
None of this replaces the capacity that normally passes through Hormuz, and none of it is cheap. But it is the difference between a supplier that stops and one that keeps trying. Customers remember which one they were dealing with when the next contract is negotiated.
Trust is built when contracts continue to be honoured under stress. It is strengthened when customers receive early, credible information about disruption rather than discovering the problem when a cargo fails to arrive. It grows when alternative routes are prepared before they are needed, and neighbouring countries share infrastructure and resources.
It is eroded by silence.
Asian buyers in focus
Where this matters most is Asia. The US Energy Information Administration estimates that 83 per cent of the LNG moving through Hormuz in 2024 went to Asian markets, with China, India and South Korea alone accounting for more than half.
These are the markets in which much of the world’s future energy consumption and industrial production will be determined, and they are being given every reason to hedge. At Gastech in Bangkok this month, buyers from Thailand, Pakistan and Bangladesh were discussing long-term contracts with US suppliers, while China Gas Holdings signed one with Venture Global.
Affordability belongs in the same argument. Physical availability means little if sudden price increases put a commodity out of reach. In emerging economies, higher energy and fertiliser costs can become fiscal, agricultural and political pressures within a single season.
No producer can remove volatility from a market like this one. What producers can offer is contractual structure, portfolio flexibility and long-term partnerships that help buyers live with it.
Asian and European buyers are preparing to ask for exactly that, including lower prices to offset higher insurance costs and guarantees of replacement cargoes if Hormuz closes again. Nicola Monti, chief executive of Edison, one of QatarEnergy’s long-term European customers, has said anyone signing new contracts in the Gulf will have to factor in insurance costs that are set to rise.
How those conversations are handled will shape the next round of contracts more than any liquefaction investment announcement.
This is how the next phase of Gulf commercial leadership will be decided. Not in capacity, or in the speed of repair, but in whether customers emerge from this period believing Gulf supply is something they can still build a 20-year investment around.
The disruption itself was not chosen by the region’s producers. The response to it is.
The global economy will continue to require the Gulf’s oil and gas, refined products, chemicals, fertilisers, metals and growing range of lower-carbon energy products. That was never seriously in doubt.
What is in doubt is something the region has rarely had to defend: the assumption, accumulated over decades, that Gulf supply would simply be there.
That assumption is the region’s most valuable export. It appears on no bill of lading, took 30 years to build and is being spent down now.
It will take considerably longer to rebuild than a liquefaction train.
Pat Breen is chairman and chief executive of Gas Strategies
