Energy Infrastructure Bombed... Qatar Warns "LNG Supply to South Korea and Others May Be Halted for Up to 5 Years" (Summary)

World’s Largest LNG Facility Targeted
Force Majeure Could Disrupt Long-Term Contracts
Risk of Costly Spot Market Procurement

The escalation of the Iran conflict involving the United States and Israel has sparked fears of an energy crisis in the South Korean economy, as energy facilities become entangled in the fallout. Iran, which controls the Strait of Hormuz—a passageway for about 20% of the world’s crude oil—has attacked Qatar’s liquefied natural gas (LNG) production complex, the world’s largest, creating a breach in the supply chain. Qatar has indicated that it will inevitably be difficult to fulfill long-term supply contracts with countries such as South Korea, and has warned that restoration work could take a long time due to concerns over further attacks. As instability in LNG supply is expected to put upward pressure on gas rates, Israel, which engaged Iran in tit-for-tat strikes on gas fields, has announced a halt to further airstrikes on energy facilities. However, with no signs of the conflict ending, it remains uncertain how long such assurances will last.

LNG: Will Prices Skyrocket?

Saad Sherida Al-Kaabi, CEO of QatarEnergy, said in an interview with foreign media on March 19 (local time), "We may have to declare force majeure for up to five years on long-term LNG supply contracts to South Korea, China, Italy, and Belgium." If Qatar’s force majeure is enforced, South Korea would be unable to import LNG for up to five years—the estimated period for facility restoration. During this time, South Korea would be forced to procure LNG from the spot market, where prices are higher than those of long-term contracts. This could result in higher gas rates for both companies and households.

LNG production facilities of Qatar Energy. Photo by Reuters Yonhap News

South Korea is among the countries that import the most LNG from Qatar, bringing in between 9 million and 10 million tons annually. The volume secured under long-term contracts amounts to 6.1 million tons per year. In addition to LNG, South Korea also imports byproducts such as condensate (-24%), LPG (-13%), and helium (-14%) from Qatar. However, Korea Gas Corporation has explained that dependence on Qatar is less than 20%. This is due to diversified LNG supply chains involving the United States, Australia, and other countries, keeping reliance relatively low.

According to QatarEnergy, Iran’s attack the previous day targeted the Ras Laffan industrial city, home to the world’s largest LNG production facility. Of the 14 total LNG production trains, two were directly affected, as well as one of the two gas-to-liquids (GTL) plants. As a result, annual LNG output is expected to decrease by about 12.8 million tons. QatarEnergy projected that 17% of its LNG export capacity was damaged and that recovery will take three to five years.

The majority of Qatar’s LNG exports head to Asian countries. According to the Energy Institute, Qatari LNG accounts for more than one-fifth of the total gas consumption in India, Taiwan, and Pakistan. As of last year, China imported the most from Qatar at 19.7 million tons, followed by India with 11.7 million tons, Taiwan with 8 million tons, Pakistan with 7 million tons, and South Korea with 6.9 million tons.

"If the LNG Crisis Drags On, Prices Could Surge"

Bloomberg News cited S&P Global energy benchmark prices, reporting on the same day that LNG prices could exceed $26 per million BTU (about 38,800 won) from late next month through early June. As of 9:15 a.m. on March 20, according to Investing.com, the South Korea-Japan LNG futures price was $22.35 per million BTU. Right after the Middle East conflict erupted, on March 2, the price was $15.77.

Short-term gas contract prices are already rising. If operations remain suspended, price hikes in the first half of this year or next year will be inevitable. Leslie Palti-Guzman, founder of Energy Vista, told Bloomberg TV, "The Ras Laffan strike is pushing back the normalization of Qatari LNG supply. Depending on the extent of the damage, resumption of operations could be delayed by four to five months, and potentially up to 30 million tons of LNG could disappear from the market."

Evan Tan, an analyst at ICIS, the world’s largest energy and commodities market intelligence provider, predicted that if the Strait of Hormuz remains closed for three months under current conditions, Asian spot prices could surpass $30 per million BTU. If the closure persists for six months, prices could soar above $40 per million BTU, he warned.

Martin Senior, Head of LNG Price Assessments at Argus Media, said, "Attacking such facilities goes beyond closing the Strait of Hormuz and creates a new dimension to the energy impact of this war. The time required for recovery could even exceed the duration of the conflict itself."

Hope Rides on "Halt to Energy Facility Airstrikes"

Amid mounting concerns over rising energy prices, the United States and Israel have announced that there will be no further attacks on energy infrastructure for the time being. U.S. President Donald Trump, during a meeting at the White House with Japanese Prime Minister Sanae Takaichi, was asked by reporters whether he had told Israeli Prime Minister Benjamin Netanyahu not to attack Iran’s oil and gas facilities, and replied, "Yes. I told him not to do it, and he agreed." Israeli Prime Minister Benjamin Netanyahu also confirmed in response to the same question that he had accepted President Trump’s request and would halt further airstrikes on Iranian gas fields.

Prime Minister Netanyahu specifically cited military achievements, suggesting that the war could end sooner than people think. He claimed that in the past 18 days, the Israeli Air Force had dropped 12,000 bombs across Iran, destroying 85% of its air defense network and 60% of its ballistic missile launchers. He also claimed that Israel had neutralized Iran’s military infrastructure, including naval bases along the Caspian Sea coast.

However, Iran is expected to continue its offensive against energy facilities. According to CNN, Iran’s Islamic Revolutionary Guard Corps (IRGC) said it had struck "various security targets and military support centers of the Zionist regime" with precision missiles, including refineries in Israel’s third-largest city, Haifa, and the southern city of Ashdod.

The previous day, Israel bombed South Pars, Iran’s largest gas field in the south. In retaliation, Iran launched airstrikes on energy facilities in Qatar, the United Arab Emirates (UAE), Saudi Arabia, and other Gulf oil-producing countries, continuing strikes on energy infrastructure. The Israeli Ministry of Energy stated that the latest attack did not cause "serious damage."

CEO Al-Kaabi stated that "the annual revenue loss from the three damaged facilities alone amounts to about $20 billion (about 30 trillion won)," and emphasized, "These national infrastructure facilities, built with $26 billion in investment years ago, should never be targets of attack." He added, "Above all, we must first cease hostilities in order to resume production." In other words, as long as military clashes between the United States and Iran continue in the Middle East, even initiating restoration work is impossible.

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