Qatar has halted liquefied natural gas (LNG) production after its facilities came under attack amid the ongoing West Asia conflict, disrupting supplies to India and squeezing feedstock availability for key domestic sectors.
India, which depends on long-term LNG contracts with Qatar for a significant share of its gas needs, has seen a temporary suspension of cargoes, leading to supply cuts up to 40 per cent for a range of industrial consumers and city gas distribution (CGD) companies.
While some industrial users can switch to alternative – though costlier – fuels, the CNG-retailing city gas sector has warned of severe stress. CGD operators said replacing contracted Qatari volumes with spot LNG priced at more than double the contracted rate could erode CNG’s price advantage and result in a permanent shift of customers to electric vehicles.
Petronet LNG Ltd, India’s largest LNG importer, hasn’t been able to send ships to Qatar to ferry LNG as the Strait of Hormuz – a narrow shipping route through which West Asian countries, including Qatar, export most of their oil and gas – is all but closed.
Additionally, Qatar has shut down liquefied natural gas production at the world’s largest export facility – which also supplied gas to India – after it was targeted in an Iranian drone attack.
In a stock exchange filing, Petronet said it has sent force majeure notice to Qatari supplier, QatarEnergy for inability to send ships.
QatarEnergy too has served a force majeure notice for inability to serve its buyer – Petronet LNG – due to hostilities in the region.
“In light of the recent and ongoing war in the Middle East region involving Iran and Israel, vessels are presently unable to safely transit through the Strait of Hormuz to reach Ras Laffan, the loading port of QatarEnergy,” Petronet said.
“Considering the prevailing security situation and the material risks posed to maritime navigation, the company (Petronet) has issued a force majeure notice to QatarEnergy in respect of its LNG tankers, namely Disha, Raahi, and Aseem.
Petronet said it has, in turn, issued corresponding force majeure notices to its downstream off-takers.
Qatar supplies 40 per cent of the 27 million tonnes a year of LNG that India imports annually.
The supply cuts have also been effected on city gas firms, which have written to government-owned gas utility GAIL, expressing concerns over the availability of domestic gas and LNG to meet the requirements of CNG for automobiles and piped cooking gas for households.
The Association of CGD Entities (ACE) in a March 3 letter to GAIL chairman and managing director said the reduction in supply of low-priced gas to 60 per cent and restriction of spot or current market supply to zero “are likely to have a significant impact on gas availability to the sector, which may adversely affect the priority segments.
While domestically produced natural gas meets just about half of the demand, India meets the rest through LNG imports.
LNG is a gas that has been cooled far below freezing point into liquid form to allow storage and transport over long distances. Petronet LNG imports such liquid gas and then regasifies it (back to gas) at its R-LNG terminals in Dahej in Gujarat, and Kochi in Kerala. The fuel is feedstock for producing fertilisers, generating electricity and raw material for city gas entities.
Media reports suggest the conflict has effectively closed the Strait of Hormuz, a key conduit for global energy flows. Roughly one-third of the world’s seaborne crude oil exports and about 20 per cent of liquefied natural gas shipments transit the narrow waterway.
As much as 20.8 million barrels per day of oil and products typically transit the Strait.
Over 80 per cent of this goes to the Asian markets, including India. About 20 per cent of global LNG supply also passes through this narrow waterway.