Iranian retaliatory strikes on Qatar’s liquefied natural gas infrastructure sent prices soaring, as they threaten to further tighten supply in Europe and Asia.
Major energy facilities were struck on Wednesday across the Middle East, an escalation of the conflict in the region. Israel carried out attacks on Iran’s South Pars gas field, which prompted retaliatory Iranian strikes on Qatar’s state-owned energy giant, QatarEnergy.
QatarEnergy said attacks on its LNG facilities at Ras Laffan Industrial City resulted in “extensive further damage.” QatarEnergy’s CEO Saad al Kaabi told Reuters that the Iranian attacks disrupted nearly 17% of its export capacity, causing an estimated $20 billion in lost annual revenue.
“I never in my wildest dreams would have thought that Qatar would be — Qatar and the region — in such an attack, especially from a brotherly Muslim country in the month of Ramadan, attacking us in this way,” Kaabi said in an interview.
The strikes against the LNG facilities have raised concerns about global supply, as much of Europe and Asia rely on supply from Qatar. The country exported more than 70% of its production to Asia in 2022, and sent 25% to Europe.
Natasha Fielding, head of gas pricing in Europe at Argus, told the Washington Examiner via email that Ras Laffan is the world’s biggest LNG export plant, making up almost 20% of global LNG supply.
“The serious damage at Ras Laffan marks a gear shift in this energy security crisis into more dangerous territory, from temporary supply loss to more permanent,” Fielding said.
“It is a gamechanger for the global LNG market, which will have to adjust to a lower supply pool for a sustained period through demand destruction,” she said. “All this is happening at a time when the supply of other commodities is scarce, making it harder for European industries to switch to alternative fuels like fuel oil and LPG or for gas-guzzling fertiliser plants to switch to imports instead of domestic production.”
At the beginning of the war in Iran, Iranian drones hit QatarEnergy facilities at Ras Laffan and Mesaieed. The energy company has since suspended production at its facilities and declared force majeure on exports.
Prices jumped in Europe following the attack.
Dutch TTF prices, the European gas benchmark, opened at about $83 per megawatt-hour after ending Wednesday under $64 per MWh. As of Thursday afternoon, the price fell back under $74 per MWh.
Fielding said that Europe does not need to be concerned about the short-term supply of LNG. The key concern, though, is about how Europe will restock for next winter.
“If Europe cannot get enough LNG to significantly replenish its gas stockpiles, then we will leave ourselves exposed to possible supply scarcity in the peak winter period,” Fielding said.
Ramanan Krishnamoorti, a professor at the University of Houston, told the Washington Examiner via email that natural gas supply and liquefaction capacity will be harmed by the attacks, leading Europe, India, and China to consider alternative sources.
He added that it could also have “huge implications” for the United States, adding that it has “plentiful natural gas, a growing liquefaction complex and a short round trip time to Europe.”
“China and India are likely to look at Russian and Australian gas as their primary supplier,” Krishnamoorti added. “This will add burden to Japanese and Korean energy markets.”
Unlike Europe and Asia, U.S. natural gas prices have not been directly affected by the strikes, because the U.S. produces its own gas domestically and it does not import gas from the region. The U.S. is the world’s top LNG exporter.
However, the war in Iran has sent global energy prices soaring.
The Strait of Hormuz, a key trading route off the coast of Iran, has remained effectively closed, which has caused oil prices to surge.
The Trump administration has taken several actions to ease oil prices at home, by waiving a federal statute that prevents foreign ships from transporting oil between U.S. ports, offering insurance to ships on the strait, and considering U.S. Navy escorts of tankers in the region.
President Donald Trump warned on social media on Wednesday that further attacks against Qatar’s LNG facilities would result in further retaliation against Iran’s South Pars gas field.
NATURAL GAS PRICES SURGE WORLDWIDE AS IRAN CONFLICT CRIMPS SUPPLY
He noted that the U.S. had no prior knowledge of the attack and that Qatar “was in no way, shape, or form, involved with it.”
“NO MORE ATTACKS WILL BE MADE BY ISRAEL pertaining to this extremely important and valuable South Pars Field unless Iran unwisely decides to attack a very innocent, in this case, Qatar,” the president said, adding that an Iranian strike on Qatar would trigger U.S. action regardless of Israeli involvement.
