- QatarEnergy has extended force majeure on liquefied natural gas (LNG) supplies to several Asian buyers, including South Korea and India, amid ongoing disruptions in the Strait of Hormuz.
- The chartering of LNG tankers by QatarEnergy is set to continue through October, indicating expectations of prolonged disruptions in supply.
- Buyers are now pressing for cheaper and more flexible deals from Qatar and the UAE, as the ongoing conflict has diminished the negotiating power of these LNG exporters.
- The Iran war has significantly impacted the reliability of LNG supplies from Qatar and the UAE, as their cargoes have struggled to navigate the Strait of Hormuz.
- The Middle East is no longer viewed as a reliable supplier of LNG due to the ongoing conflict, which has led to increased insurance costs and risks for buyers.
- European LNG buyers are now seeking lower prices and increased flexibility in contracts, reflecting the heightened risks associated with the region.
QatarEnergy has extended force majeure on LNG supplies to buyers in South Korea and India, anticipating ongoing disruptions due to the Iran war. The conflict has forced QatarEnergy to shut liquefaction trains and suspend exports, impacting about 20% of global LNG trade.134
As a result, Asian and European buyers are pushing for lower prices and increased flexibility in contracts. Historically, long-term contracts from Qatar and the UAE were priced at 12.6%-12.7% of the Brent crude price, but recent deals have seen this drop to 12.3%, reflecting the heightened regional risks.6
The Strait of Hormuz remains a critical chokepoint, with renewed Iranian attacks on tankers raising concerns over supply reliability. Nicola Monti, CEO of Italy's Edison, noted, "Anyone entering into new contracts in the Gulf region will also have to take into account potential insurance costs, which are set to increase."
QatarEnergy's leasing of LNG tankers through mid-October indicates expectations of prolonged disruptions, with reports suggesting that at least nine LNG carriers have been sub-chartered to third parties, including major companies like Chevron and BP. Higher insurance costs are expected to become standard in new Gulf gas deals, further complicating the landscape for LNG buyers.
As the situation evolves, buyers are also seeking guarantees of replacement cargoes from Qatar and the UAE to mitigate risks associated with potential disruptions in the Strait of Hormuz.
“Force majeure has been extended until mid-September for buyers in South Korea and India; at least nine Qatari LNG carriers were sub-chartered to firms like Chevron and BP. Post-war contracts have been priced at 12.3% of Brent, down from 12.6%-12.7%, signaling buyers' stronger negotiating position.”
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