What is the likely impact of the recent Qatar crisis on international LNG trade originating from Qatar?
Facts
- Qatar exported 80 million tons of LNG in 2016, approximately 31% of total global supply.
- The route out of Middle East for crude oil as well as LNG is through Strait of Hormuz.
- Major markets for Qatar LNG are Korea, Japan, Taiwan, India, Pakistan, Egypt, Kuwait and Europe.
- Egypt buy Qatar LNG via global traders not directly, and there is take or pay clause defined in long term LNG contracts.
- Qatar supply 2 BCF/day of natural gas to Oman and UAE through Dolphin gas pipeline which will remain operational despite the sanctions.
- Smallest exporter of crude oil, approximately 620,000 BBL/day.
- Fujairah, UAE is the main bunkering port for all the vessels leaving Middle East.
Analysis
- Major LNG and Crude oil demand exist outside the Middle East.
- Strait of Hormuz is operational and only route out for the region for crude and LNG from the region.
- Egypt already planning to reduce LNG imports due to the discovery of gas fields.
- Long term buyers will keep on buying from Qatar and have been assured that there will be no disruption in supply because of the crisis.
- Expected impact on LNG trade will be negligible other than increase cost of shipping as LNG vessels needs to refuel. Some vessels may need to consider other regionals ports like Pakistan, India, Sri Lanka and Singapore.