Weirdly, big winners in this war could be renewables, and, short term anyway, Coal.
Energy Secretary (and fracking millionaire) Chris Wright’s big grift for Liquified Natural gas (LNG), could be hobbled, even long term, given the sudden uncertainty in Persian Gulf stability.
QatarEnergy has suspended liquefied natural gas (LNG) production following a drone attack, straining the global LNG market.
On Monday, Iranian drones struck two sites, according to Qatar’s Ministry of Defence: a water tank at a power plant in Mesaieed Industrial City and an energy facility in Ras Laffan belonging to QatarEnergy, the world’s largest LNG producer.
Qatar’s LNG exports represent 20 percent of the global market. With fewer products reaching the market, LNG supply is down, causing prices to surge.
While 82 percent of QatarEnergy’s sales are to Asian countries, the halt puts increased pressure on other markets across the globe, too, particularly in Europe.
In effect, a smaller supply of gas will need to meet the same global demand. As a result, gas prices have already started soaring: Benchmark Dutch and British wholesale gas prices soared by almost 50 percent, while benchmark Asian LNG prices jumped almost 39 percent, on Monday after the QatarEnergy announcement.
“Not good if Qatar stays offline for long, of course,” said Ziemba. The only silver lining for Europe: “At least the worst of the winter in Europe may be behind,” Ziemba pointed out.
On the eve of the Iran war, Energy Secretary Chris Wright traveled to Texas to celebrate the expansion of a liquefied natural gas terminal.
Gas will likely be “the fastest-growing energy source probably through the rest of my life,” Wright told a crowd gathered at Cheniere’s Corpus Christi plant.
Two weeks later, that outlook has become significantly more complicated. The U.S.-Israel war in Iran has resulted in shutting down the world’s largest LNG facility, in Qatar, and effectively closed the Strait of Hormuz, stranding about a fifth of global gas supplies. Escalating attacks by Iran on tankers and cargo vessels on Thursday have dimmed hopes of reopening the shipping route and led analysts to question the future growth of gas.
“The LNG industry has a problem,” said Alex Munton, an analyst who tracks the industry at Rapidan Energy Group.
The conflict presents a double-edged sword for the U.S. The shutdown of the Qatari plant, Ras Laffan, is an opportunity for American LNG developers, who can talk up the relative security of their supplies to potential customers. But whether those buyers will be willing to sign long-term contracts is an open question as fighting in the Persian Gulf diminishes the global supply of gas — and raises prices around the world. The conflict comes just four years after Europe shutoff gas pipeline import from Russia in retaliation for Moscow’s invasion of Ukraine.
“If you stack up the disruption in terms of what’s been cut off from the Gulf with bottlenecks on Hormuz on top of the structural decrease in Russian supply post-2022, the volumes are staggering,” Munton said. “I think every market will now, if they weren’t thinking already, have to think very seriously about how LNG fits into their energy mix from a security of supply standpoint.”
“We’re living in an entirely different world now,” said Ira Joseph, a gas analyst at Columbia University’s Center for Global Energy Policy. “Renewables and coal win here and LNG loses, strategically, longer term.”
QatarEnergy, the state owned gas giant, had marketed its LNG as a reliable and secure fuel that could power other nations’ growth. Many LNG buyers and analysts agreed. Shutting down the Strait of Hormuz was seen as an “outer stratosphere” scenario, Joseph said. Now gas buyers might think twice before inking long-term contracts.
“They’re like, OK, well, this clearly can happen, because it just did,” he said.
Gas will likely be “the fastest-growing energy source probably through the rest of my life,” Wright told a crowd gathered at Cheniere’s Corpus Christi plant.
OK. Drop dead.