‘Armageddon scenario’ for gas markets as Qatar hit by missiles
Traders and analysts warn of lasting disruption after damage to facility that supplies a fifth of the world’s LNG
Malcolm Moore, Rachel Millard and Verity Ratcliffe in London
As emergency workers sifted through the smouldering wreckage at Qatar’s Ras Laffan complex on Thursday morning, traders in Europe and Asia were waking up to a fresh energy crisis.
In normal times, a fifth of the world’s supply of liquefied natural gas (LNG) flows from Ras Laffan, a vast industrial site almost three times the size of Paris built over three decades at a cost of hundreds of billions of dollars.
LNG terminals are some of the biggest and most complex constructions in human history, and Ras Laffan is the largest of them all, turning Qatar’s huge gas reserves into a super-chilled fuel that can be shipped around the world.
At least before the Iranian missiles arrived.
“I woke up this morning and thought, ‘No, please no,’” said Anne-Sophie Corbeau, a former head of gas analysis at BP who is now at Columbia University’s Center on Global Energy Policy.
“This has always been my nightmare scenario, my Armageddon scenario, the one I didn’t want to happen.”
Two gas traders said they were struggling to process the news after Iran launched a double-tap strike, firing ballistic missiles into the facility, first on Wednesday night then again in the early hours of Thursday morning.
“This is unprecedented,” said one of the traders.
Gas prices in Europe rose 30 per cent as markets reopened and have more than doubled since the start of the war, as traders try to calculate the impact of months, or longer, without Qatar’s gas flowing to world markets.
Oil prices also jumped 10 per cent to almost $119 a barrel, due to fears of further strikes on energy supplies.
State-owned QatarEnergy, the operator of Ras Laffan, told Reuters the damage to two of its LNG units, in which ExxonMobil was a co-investor, would take three to five years to repair, cost the company $20bn a year in lost revenue, and force it to cancel long term contracts with Italy, Belgium, Korea and China.
The volume of gas now lost for the foreseeable future is roughly 17 per cent of Qatar’s total capacity.
Before the attack, traders assumed that the flow of LNG from Ras Laffan would resume once the Middle East conflict eased and the Strait of Hormuz was safe for tankers to pass through.
Gas prices, having risen last week, had stabilised far below the levels seen during Russia’s 2022 invasion of Ukraine.
But that assumption has now been shattered.
One trader said that gas prices in Europe would be pushed higher “through 2027” and that Europe would find it harder to refill its gas storage tanks this summer as Asian buyers snapped up LNG from the US to make up for the lost supply.
Asia was already facing shortages and rationing due to the loss of supply from the Gulf.
Europe, which has become more reliant on LNG since Russia slashed pipeline exports during its war with Ukraine, is now expected to be pitched into direct competition against countries such as Japan and South Korea for limited cargoes.
Laurent Segalen, a clean energy investment banker, said: “It is apocalypse now. The coming months for gas importers are going to be a bloodbath.”
Ras Laffan has 14 gas liquefaction units that chill gas into 77mn tonnes a year of LNG, enough to meet the entire annual gas demand of Japan, or more than the UK and Italy combined.
The specialised equipment to super-chill gas into LNG is incredibly complicated and will have to be painstakingly replaced, a job that will start only when Qatar is confident that workers can access the site safely, without fear of further attacks.
“What we can conclude immediately is that regardless of when the conflict now ends, a resumption of normal production from Qatar is not going to happen in a matter of weeks,” said Tom Marzec-Manser, an LNG expert at energy consultancy Wood Mackenzie.
He had previously estimated it would take around 40 days for Qatar to restart production at Ras Laffan, “but that cannot now be the case”.
Qatar’s plans to hugely expand Ras Laffan, adding a further six liquefaction units over this year and next, would also be delayed, he said.
“There is an element of uncertainty, but we know now this is a months-long reduction in supply,” he added.
While some US projects are starting up shortly, there is no adequate compensation for Qatari gas that is “not politically very complicated”, said Corbeau, noting that some politicians had already been calling for a relaxation on bans on Russian gas.
Meanwhile, many countries are already starting to switch to coal-fired power generation, and some industrial sites across south-east Asia are having to ration their output or shut down.
“The world of energy is going to fracture between the haves and the have-nots,” said Segalen.
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