Middle Eastern gas assets close as Iranian response widens

Qatar halted LNG production on March 2 following Iranian drone strikes on critical infrastructure, triggering a severe shock across global energy markets. The precautionary shutdowns of oil and gas facilities now span the Middle East, reflecting a rapid deterioration in regional security following US and Israeli strikes against Iran.

QatarEnergy confirmed the suspension of all output after its facilities were targeted. “Due to military attacks on QatarEnergy’s operating facilities in Ras Laffan Industrial City and Mesaieed Industrial City in the State of Qatar, QatarEnergy has ceased production of liquefied natural gas (LNG) and associated products,” the state-owned company said. It added: “QatarEnergy values its relationships with all of its stakeholders and will continue to communicate the latest available information.”

The Qatari Ministry of Defence said two Iranian drone attacks struck energy assets. One drone targeted a water tank at the Mesaieed Power Plant, while the second hit a power plant in Ras Laffan Industrial City. The ministry reported no casualties and said authoritative agencies will conduct a damage assessment before issuing further updates.

Just last week, QatarEnergy awarded the engineering, procurement, and construction (EPC) contract for the onshore LNG plant of the North Field West (NFW) project.

The joint venture contract – awarded to Technip Energies, Consolidated Contractors Company, and Gulf Asia Contractor – encompasses two mega-trains with a 16 MTPA capacity. The development, designed to elevate Qatar’s total production to 142 MTPA, also includes facilities to produce 175,000 barrels of oil equivalent per day of condensate, ethane, and LPG.

The disruption carries profound implications for global supply. Qatar is the world’s second-largest LNG exporter, accounting for approximately 20% of global supply. While Asian clients represent 82% of QatarEnergy’s customer base, the severing of this supply artery – coupled with a broader halt in shipping traffic through the Strait of Hormuz – has panicked Western markets.

European gas prices soared following the announcement. On the Dutch futures market, the benchmark price opened 25% higher on March 2 – the largest single-day increase since August 2023. Following confirmation of the shutdown, prices climbed further, registering an overall increase of nearly 40% and pushing the cost of a megawatt-hour above EUR38 (US$44.5).

The attacks have forced operational suspensions beyond the Gulf. In Iraqi Kurdistan, most oil production is suspended and the Khor Mor gas field was forced to shut down, bringing with it a shortage in power with gas-fired power plants unable to operate.

Offshore Israel, the government instructed Chevron to shut down the Leviathan gas field. The US major is currently expanding the asset’s capacity to roughly 21 billion cubic metres a year to support a $35bn export agreement to Egypt. A spokesperson for Chevron, which also operates the Tamar field, told Reuters its facilities remain secure. Separately, Energean has shut down its production vessel servicing smaller Israeli gas fields.