The world could face a gas crisis in 10 days due to the war in Iran - Media
Kyiv • UNN
Due to the blockade of the Strait of Hormuz and attacks on a plant in Qatar, LNG exports will stop in 10 days. Global gas prices are soaring due to the deficit.
Countries worldwide are on the brink of disaster as liquefied natural gas flows from the Persian Gulf are set to abruptly cease within the next ten days, as the last few tankers from the region reach their destinations, UNN reports, citing the Financial Times.
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Qatar, which produces a fifth of the world's liquefied natural gas, was forced to halt exports after Iran blocked the Strait of Hormuz at the mouth of the Persian Gulf in the early days of the conflict.
Since then, it has suffered enormous losses at its giant LNG plant in Ras Laffan, which was hit by Iranian rocket fire this week, leading to a sharp rise in gas prices in Asia and Europe.
However, according to an analysis by independent shipbroker Affinity, many gas tankers loaded in Qatar and the United Arab Emirates were already en route to their destinations before the war began, meaning that some customers are only now beginning to feel the effects of the supply loss.
Countries whose economies depend on imports will be forced to pay exorbitant prices to compete for LNG supplies from the US and other countries, switch to other fuels, or compel households and businesses to reduce their consumption.
Many oil and gas-poor Asian countries have already introduced measures to prevent shortages, such as a four-day work week.
According to vessel tracking data, only one LNG shipment from the Persian Gulf is still scheduled for Asia, which purchases almost 90 percent of regional production. Six more LNG shipments are expected to arrive in Europe.
Pakistan is in a particularly vulnerable position. Almost 99 percent of its LNG imports last year came from Qatar. The last shipments from Ras Laffan arrived on the second and third days of the war with Iran.
According to two sources familiar with the situation, both LNG import terminals in the country have reduced their operations to one-sixth of normal levels and will completely cease gas supplies by the end of the month.
Iqbal Ahmed, Chairman and CEO of Pakistan GasPort, stated that one of the two terminals owned by Pakistan GasPort will run out of LNG for processing in the coming days. "After that, we will run out of supplies," he said. "We don't know when the next shipment will arrive."
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The publication notes that before the US and Israeli strikes on Iran, Islamabad faced an LNG surplus and asked supplier QatarEnergy to redirect 24 shipments that were supposed to arrive in Pakistan this year. It also asked the Italian company Eni to redirect another 11 shipments.
According to a source familiar with the situation, state buyer Pakistan LNG asked Eni to send some of these shipments after the war began, but the request was not granted. Eni declined to comment.
Pakistan LNG also contacted traders and suppliers in Europe, Oman, the US, Azerbaijan, and Africa, but all offered prices that were too high for Pakistan, the source said.
The media adds that Pakistan will likely use more expensive and dirtier fuel oil for power generation if the conflict continues.
Bangladesh is vulnerable for similar reasons, but to a lesser extent, as it receives some LNG from outside the Persian Gulf. It will also struggle to pay exorbitant prices for replacement LNG that it would otherwise receive from the Persian Gulf, and it has no alternative fuels. The government has introduced gas rationing measures, including closing universities.
Taiwan, as one of the largest buyers of LNG from the Persian Gulf, is grappling with the consequences of its attempt to transition from coal to cleaner gas while phasing out nuclear power before a full transition to renewable energy. It quickly took steps to secure replacement shipments immediately after the war began.
According to traders, China and Japan are also likely to purchase some spot LNG cargoes to compensate for the deficit from Persian Gulf countries. "We plan to purchase LNG on the spot market from JKM to cover supplies," said one Japanese LNG trader. But traders and energy companies are taking a wait-and-see approach and plan to return to using coal, they added.
Another trader confirmed that Japanese energy companies are currently refraining from purchasing LNG. "Only a few buyers are considering spot deliveries." Although Japan is the world's second-largest LNG importer after China, it is less susceptible to disruptions in flows from the Middle East, as only 6 percent of its supplies pass through the Strait of Hormuz.
China receives 30 percent of its LNG from Persian Gulf countries but has some domestic gas production and can switch to coal-fired power generation if necessary.
The publication adds that Japan also plans to use more coal and nuclear power for electricity generation. In January, it partially restarted the world's largest nuclear power plant in Niigata Prefecture.
Until more vessels are allowed to pass through the Strait of Hormuz, global LNG supplies will remain constrained.
Even then, market supply will shrink as 17 percent of Qatar's LNG production capacity will remain offline for three to five years due to the attacks in Ras Laffan, said the country's energy minister, Saad Al-Kaabi.
"This means we will be forced to declare force majeure for up to five years on some long-term LNG supply contracts," Al-Kaabi said.