Qatar Energy suspends liquefied natural gas (LNG) supplies Production Global LNG markets are on edge after drone strikes.

On Monday, Iranian drones struck two locations: water tanks at a power plant in the Mesaied Industrial City and an energy facility in Ras Laffan belonging to Qatar Energy, the world’s largest producer of liquefied natural gas, according to Qatar’s defense ministry.

While no casualties were reported, Qatar Energy suspended production of liquefied natural gas and other products at the affected sites for safety reasons.

Why did Qatar Energy suspend operations?

The drone strikes hit the Ras Laffan complex, home to a liquefied natural gas processing unit set to be exported.

The state-owned energy company was forced to declare so-called force majeure, which exempts it from contractual obligations in the event of extraordinary circumstances such as a drone strike, Reuters and Reuters reported. Bloomberg Newsciting people familiar with the matter.

Meanwhile, an intensifying naval war between Iran and the United States, coupled with missiles flying over the region, effectively blocked the strategic trade route Strait of Hormuz. According to Reuters, at least 150 ships have broken down in and around the strait, including vessels carrying liquefied natural gas.

Liquefied natural gas and oil shipments in the strait have dropped by 86%, with about 700 ships idle on both sides of the strait. Anadolu Agency.

How will this impact the broader global LNG market?

Qatar’s LNG exports account for 20% of the global market. LNG supply dwindled as less product entered the market, causing prices to surge.

“The pressure on energy infrastructure in the Gulf will certainly escalate overnight,” said Rachel Ziemba, a senior fellow at the Center for a New American Security, a think tank.

The countries most directly affected are Asian markets, particularly Bangladesh, India and Pakistan.

China is the world’s largest natural gas importer, but most of its imports come from Australia, which accounts for 34% of its imports, according to the U.S. Energy Information Administration.

However, energy expert Maxim Sonnen of Stanford University’s Center for Future Fuels said that while Qatar Energy’s decision would cause “volatility” in energy markets, he would not yet describe the situation as a “crisis.”

“We will see near-term volatility in the LNG market, especially if infrastructure in Qatar and other hubs is disrupted,” Sonin told Al Jazeera. However, he added, “I do not expect a repeat of the 2022 gas crisis in Europe,” referring to the period following Russia’s full-scale invasion of Ukraine when many European countries sought to significantly reduce their reliance on Russian oil and gas.

What are the world’s largest LNG exporters?

Russia was the world’s largest exporter of LNG until 2022, but its sales have plummeted since the start of the war in Ukraine.

The United States is now the world’s largest exporter of LNG, followed by Qatar and Australia.

Will this increase pressure on Europe?

While 82% of Qatar Energy’s sales go to Asian countries, the shutdown has also put greater pressure on other markets around the world, especially Europe.

In reality, less natural gas supply is needed to meet the same global demand. As a result, gas prices are already surging: on Monday, benchmark wholesale natural gas prices in the Netherlands and the UK surged by almost 50% after Qatar Energy’s announcement, while benchmark LNG prices in Asia jumped by almost 39%.

“Of course, it would not be good if Qatar was offline for a long time,” Ziemba said. The only silver lining for Europe: “At least the worst of Europe’s winter may be behind us,” Zimba noted.

The EU gas coordination group will meet on Wednesday to assess the impact of the expanding conflict in the Middle East, a European Commission spokesman told Reuters on Monday. The group includes representatives from member governments. It monitors the EU’s gas storage and supply security and coordinates responses during crises.