Iran hits two Qatari LNG trains knocking out 17% of its export capacity

Major attack on Ras Laffan plant damaged two of its 14 LNG trains as well as a gas-to-liquids facility.

What: Iran has carried out another attack on QatarEnergy’s Ras Laffan Industrial City that will sideline two LNG for repairs.

Why: The attack was a retaliation for Israel’s airstrikes on Iran’s South Pars gas field and the Asaluyeh gas processing and petrochemical facility.

What Next: Qatar’s two LNG trains knocked out will require repairs that will take 12.8mn tonnes of LNG off the market for three to five years.

Unprecedented Iranian attacks on Qatar’s Ras Laffan Industrial City have knocked out two of QatarEnergy’s LNG trains taking 17% of its export capacity off the market, the company’s CEO told Reuters on March 19.

About five ballistic missiles were fired on March 18 at the world’s biggest LNG export complex, with four of the missiles intercepted. However, the one missile that hit the LNG export terminal caused extensive damage with fires that spread.

Saad al-Kaabi Qatar’s Minister of Energy and President and CEO of QatarEnergy told Reuters that the two damaged liquefaction units that will require repair will be offline for between three to five years, removing 12.8mn tonnes per year (tpy) of LNG.

Kaabi estimated that the Gulf country will experience $20bn in lost annual revenue from the two liquefaction units being off the market. Repairing the liquefaction trains will also come at a high cost to the Gulf Emirate with Kaabi estimating repair costs to be around $26bn.

One of Qatar’s two gas-to-liquids facilities was also hit in the major attack that came in retaliation to a hit earlier in the day by Israel on Iran’s South Pars gas field and the Asaluyeh gas processing and petrochemical facility.

The Ras Laffan Industrial City was also hit by an Iranian drone on March 2. With the Strait of Hormuz closed for vessels to pass due to threats of attack by Iran, about one-fifth of global LNG supply has been blocked off the market.

Qatar declared force majeure to its buyers on March 4 for short-term contracts. One week later, Shell declared force majeure on LNG cargoes bought from QatarEnergy and sold to buyers. India’s state-run Petronet, which also buys and sells LNG cargoes from QatarEnergy declared force majeure on March 5. Additionally, Kuwait Petroleum Corporation, Bahrain’s Bapco Energies, and Omani trading house OQ have also declared force majeure.

Following Iran’s latest attack, QatarEnergy may now be required to declare force majeure on long-term contracts extending up to five years it has signed with Belgium, China, Italy, and South Korea.

However, QatarEnergy is not the only energy giant to be hit hard by the attack on the Ras Laffan Industrial City. US supermajor ExxonMobil is a partner in the facility, with the Houston-headquartered firm owning a 34% stake and a 30% stake in the two damaged liquefaction units.

And beyond LNG, the damage to the complex’s gas-to-liquids facility is expected to reduce its condensate exports by about 24% and liquefied petroleum gas by around 13%. Helium output is also expected to dip by around 14%, while sulfur and naptha output are both expected to fall by 6%.

Indeed, markets in Asia and Europe are now clamoring for LNG cargoes as an immediate shortfall in supply of the super-chilled fuel will disrupt markets in 2026. Worries of a supply glut in 2027 for the rest of the decade seem all but gone now.

The shock to the LNG market is the biggest seen since Russia’s invasion of Ukraine in February 2022. It has also put construction timelines and permitting processes under the spotlight. The LNG sector has long been plagued by the lengthy and time-consuming process to both construct facilities and obtain the requisite permits, with some countries more nimble than others.

With appetite for LNG soaring in energy-hungry Asia, Canada could be ideally placed to capitalize on the disruption given the fast and direct shipping path from Canada’s west coast.

However, the upstart LNG exporter only began shipping cargoes in July. And now as opportunity strikes some industry professionals are calling out the country’s arduous permitting process.

In an interview with The Canadian Press on March 19, TC Energy’s CEO Francois Poirier urged Canadian regulators to streamline processes for Canada to be more competitive in the global LNG market.

Poirier lamented that Canada has consistently been a step behind the US and Australia in developing its LNG sector. He also highlighted that the permitting process for TC’s Southeast Gateway project in Mexico was only seven months, while it has taken several years for new projects to get approved in Canada.

Canada’s west coast export terminals offer an enormous advantage as a reliable supplier for Asian markets since they do not need to pass through any chokepoints.

The Houthis and Iranian Revolutionary Guard have both threatened LNG tankers attempting to transit through the Bab al-Mandab Strait and the Strait of Hormuz, respectively in recent years. US Gulf Coast export terminals have also been plagued by low water levels and lengthy waiting times at the Panama Canal.

Never let a crisis go to waste is an adage that is getting some consideration in the Canadian LNG market as exporter hope the opportunity is seen to streamline processes and speed up transitioning Canada from a new kid on the block to an LNG exporting heavyweight.