Middle East Conflict Creates LNG Bottleneck

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Written by Jesse Broehl, Assistant Editor-in-Chief, IIR News Intelligence (Sugar Land, Texas)

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Summary

The war in Iran is causing many disruptions in the energy sector. Crude oil leads the concerns, but a bottleneck in liquefied natural gas (LNG) exports from the region is also a big concern. LNG from the Middle East, and primarily from Qatar, has been a critical source of energy via export primarily to Asia, with China, India, and Taiwan among buyers, and some capacity increasingly going to Europe as well.

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More than 20% of Global LNG Produced by a Few Middle East Plants

The war in Iran is causing many disruptions in the energy sector. Crude oil leads the concerns, but a bottleneck in liquefied natural gas (LNG) exports from the region is also a big concern. LNG from the Middle East, primarily from Qatar, has been a critical source of energy via export primarily to Asia, with China, India and Taiwan among buyers, and some capacity increasingly going to Europe as well.

More than 20% of global LNG is produced in the Middle East, and by only a few facilities. The largest of those facilities are owned and operated by state-owned QatarEnergy (QatarEnergy LNG). On Monday, March 2, QatarEnergy announced it was forced to halt LNG production due to Iranian military strikes on its facilities.

The specific damage and any estimates on a timeline for repairs and return to service was not provided. On March 4, QatarEnergy declared force majeure to its affected buyers. The declaration relieved QatarEnergy from performing its contractual obligations to LNG buyers due to the unforeseeable and extraordinary events beyond their control.

Many refineries have also been impacted and are compiled as comment updates in IIR Energy's story, Subscribers to IIR Energy's Breaking Energy News (BEN) can read Middle East Oil and Gas Assets Impacted by Iran War. All offline events due to the conflict in the Middle East by plant and unit are compiled here.

QatarEnergy's LNG Represents 72% of Middle East LNG Capacity

QatarEnergy plants at Ras Laffan North and South facilities represent around 77 million metric tons per year of LNG export production capacity. This is around 72% the of the 107 million metric tons per year of liquefaction capacity in the Middle East.

There are not yet any confirmed reports of other LNG facilities being attacked or ceasing production. The Qatar units offline are already enough for severe global disruption. The other plants are located in Oman, Egypt and the United Arab Emirates. The units in Egypt have not been producing LNG for export since domestic gas demand exceeds Egypt's domestic production. Oman's production is located outside the Strait of Hormuz but directly across the Gulf of Oman from Iran.

Specific plants, locations and estimated operational LNG capacity are shown in the accompanying charts from IIR Energy plant data.

Ramp Up After Hostilities Will Take Time

Even when production can resume at QatarEnergy's facilities after hostilities cool -- which is currently on a very unknown timeline -- these LNG plants are not turned back on with the flip of a switch. LNG production is started up in a days-long, carefully sequenced process. Some estimates suggest up to two weeks to ramp up LNG production, and this could only come after any needed repairs are performed.

Likewise, it takes time for the export terminals and receiving shipping vessels to be able to load up the product. Vessel traffic has also ground to a halt due to the hostilities and vulnerability of the Strait of Hormuz. If vessels cannot move LNG, it cannot be produced and efficiently stored.

IIR News Intelligence will continue to follow this developing story and provide updates as needed.

Key Takeaways

• LNG from the Middle East, primarily from Qatar, has been a critical source of energy via export primarily to Asia, with China, India, and Taiwan among buyers, and some capacity to Europe.
• More than 20% of global LNG is produced in the Middle East, and by only a few facilities.
• QatarEnergy's plants represent 72% the of LNG liquification capacity in the Middle East
• QatarEnergy plants at Ras Laffan North and South facilities represent around 77 million metric tons per year of LNG export production capacity
• Re-starting LNG production is a days-long, carefully sequenced process.

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About IIR News Intelligence
IIR News Intelligence is a trusted source of news for the industrial process and energy markets, powered by Industrial Info Resources' Global Market Intelligence (GMI).

About Industrial Info Resources
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 250,000 current and future projects worth $30.2 Trillion (USD).