Worsening Energy Crisis Amid Iran War...Qatar Signals Possible 'Force Majeure' on LNG Supply Contracts

17% of LNG Export Capacity Damaged

Facility Recovery to Take 3–5 Years

Actual Restoration Difficult During Ongoing Conflict

Korea Accounts for 20% of Total LNG Imports

Europe, Japan, and Other LNG-Dependent Nations Also Expecte

LNG facility. Getty Images

The escalation of the Iran war is intensifying the energy crisis. Following the effective blockade of the Strait of Hormuz, through which approximately 20% of the world’s crude oil supply passes, the situation has continued to worsen as even Qatar’s world-leading liquefied natural gas (LNG) production facility has come under attack.

World’s Largest LNG Facility Attacked...Recovery to Take 3–5 Years

The LNG facility targeted by Iran’s airstrike is the Ras Laffan complex, located 80 kilometers northeast of Qatar’s capital, Doha. This is the world’s largest LNG production facility, accounting for about 20% of global LNG supply.

The previous day, after Israel bombed South Pars, Iran’s largest gas field in southern Iran, Iran retaliated by launching airstrikes on energy facilities in Gulf oil-producing countries such as Qatar, the United Arab Emirates (UAE), and Saudi Arabia.

According to QatarEnergy, the attack directly damaged 2 out of 14 LNG production trains and 1 out of 2 gas-to-liquids (GTL) facilities. The attack appears to have targeted facilities in which American companies hold stakes. ExxonMobil, an American oil company, owns 34% of the shares in the damaged LNG facility S4 and 30% in S6.

As a result of the attack, LNG production is expected to decrease by approximately 12.8 million tons per year. QatarEnergy stated that 17% of its LNG export capacity has been compromised, and it is expected to take 3 to 5 years to restore the facilities.

Saad Sherida Al-Kaabi, CEO of QatarEnergy, told Reuters in an interview that “the annual revenue loss from the three facilities hit amounts to about $20 billion (around 30 trillion won),” emphasizing that “these national infrastructure facilities, which cost $26 billion to construct years ago, should never be targets of attack.”

He further stressed, “First and foremost, hostilities must cease in order to resume production.” This implies that if military conflict between the U.S. and Iran continues in the Middle East, it may not even be possible to begin restoration of the facilities.

Korean LNG Supply Emergency...Increase in U.S. Imports Likely

Notably, CEO Al-Kaabi said in the interview that long-term LNG supply contracts signed with major countries, including South Korea, could face difficulties. He told Reuters, “We may have to declare force majeure for up to five years on long-term LNG supply contracts bound for Korea, China, Italy, and Belgium.”

If Qatar’s declaration of force majeure is recognized, it will be exempted from liability even if it fails to fulfill its long-term supply contracts. In other words, during the facility restoration period, it will not be subject to delay penalties or compensation for damages arising from non-supply of LNG.

The volume South Korea has contracted with Qatar through long-term agreements amounts to about 6.1 million tons annually. According to Korea Gas Corporation, as South Korea diversifies its LNG supply chain to countries such as Australia and the United States, its dependence on Qatar has dropped to below 20%. The corporation also stated that it currently holds inventory levels above its mandatory reserves, ensuring sufficient capacity to respond to supply-demand risks through the end of the year.

However, if QatarEnergy actually declares force majeure and South Korea cannot import its LNG quota from Qatar for five years, the shortfall during that period will have to be covered on the spot market, where prices are higher than those in long-term contracts.

In this case, imports of LNG produced in North America would likely have to increase. According to Korea Gas Corporation’s year-end report, “2026 International LNG Market Outlook,” more than 25% of global LNG supply is now accounted for by U.S.-produced LNG.

Not only LNG, but also exports of byproducts such as condensate (-24%), LPG (-13%), and helium (-14%) are expected to decrease in succession, raising concerns of supply instability across the global petrochemical and high-tech industries.

Energy Prices Surge Across the Board...Other Countries on Alert

The market has already begun to reflect these concerns. The price of Brent crude oil futures, which serves as the global benchmark, soared to $111 per barrel during intraday trading, and European natural gas prices jumped 6% after media reports of the QatarEnergy CEO’s interview.

Martin Senior, head of LNG price assessment at Argus Media, said, “Attacking such facilities creates a new dimension of energy impact from this war beyond the closure of the Strait of Hormuz, and the time needed for recovery could exceed the duration of the conflict itself.”

If LNG prices rise, other countries such as Europe, Japan, and Turkey will also be adversely affected, as they are major LNG consumers.

Babak Hafezi, professor of international business at American University, said the rise in LNG prices would affect the European market, noting, “Since the outbreak of the war in Ukraine and the destruction of the Nord Stream pipeline, Europe has become increasingly reliant on LNG.” He added, “Rising LNG prices will lead to reduced demand, and the hardest hit will be small countries in the Southern Hemisphere with weaker economies.”

This content was produced with the assistance of AI translation services.