Qatar Halts LNG Production, Declares Force Majeure Amid Regional Tensions

This move comes amid escalating tensions in West Asia and after its energy infrastructure was targeted, including the Strait of Hormuz, a critical oil shipping route, which is currently under threat.

A force majeure notice is a formal contract notice sent when an unforeseen, uncontrollable event, such as war or a natural disaster, prevents a party from meeting its obligations.

"QatarEnergy declares Force Majeure. Further to the announcement by QatarEnergy to stop production of liquefied natural gas (LNG) and associated products, QatarEnergy has declared Force Majeure to its affected buyers. QatarEnergy values its relationships with all of its stakeholders and will continue to communicate the latest available information," the company stated in a post on X.

The Strait of Hormuz, a narrow maritime passage connecting the Persian Gulf with the Gulf of Oman, is one of the world's most critical energy chokepoints, with a significant portion of global oil and liquefied natural gas shipments passing through it.

Sehul Bhatt, Director, Crisil Intelligence, stated that Qatar, its single-largest supplier, supplies 10-11 MTPA of LNG to India, accounting for 45% of its imports. India's LNG supply chain would face disruption after Qatar declared force majeure on deliveries.

Bhatt said, "India's liquefied natural gas (LNG) supply chain is facing disruption after Qatar, its single-largest supplier, declared force majeure on deliveries following a halt in production at its Ras Laffan facility. As a result, Asian spot LNG prices have flared up from ~$10/MMBtu to $24-25/MMBtu. Qatar supplies 10-11 MTPA of LNG to India, tantamount to 45% of its imports. Parallelly, India's largest LNG terminal operator, has also invoked force majeure for its affected tankers after insurers pulled out of key Middle East routes leading to choking of supplies in the Strait of Hormuz. It has also served force majeure notices to downstream off-takers, mostly oil marketing companies and public sector utilities, leading to curtailed supplies," he added.

The disruption may lead to price-sensitive industrial consumers seeking alternative fuels like liquefied petroleum gas, furnace oil, or naphtha.

"If supply tightness persists, price-sensitive industrial consumers may seek alternative fuels, such as liquefied petroleum gas, furnace oil, or naphtha. The extent of this feedstock diversification will be a function of the cost-benefit math. Elevated LNG prices can also translate to costlier gas supplies to fertiliser plants. This, in turn, can increase the government's subsidy burden," Bhatt added.

- ANI