Qatar’s Gulf Dispute Unnerves Global LNG Market

The ORYX GTL plant, Qatar.

Credit: SASOL / CC BY-SA 3.0

Saudi Arabia and its Gulf associates cut ties with the world’s top seller of liquefied natural gas (LNG), Qatar, recently. This has created reverberating concerns over LNG supply disruptions to both neighbouring countries and the global gas markets.

It is reported that Saudi Arabia, the United Arab Emirates, and Egypt are dependent on LNG and gas from Qatar via pipeline. Meanwhile, Bahrain said that they would cut off all ties inclusive of transport links with Qatar. The allies have reportedly accused Qatar that supplies a third of global LNG of facilitating extremism.

With rifts lifting oil prices most LNG traders had a wait-and-watch approach. Meanwhile, Japan and India, Qatar’s top clients received assurances of normal supplies. After the diplomatic break, the UAE expelled all vessels to-and-from Qatar. The ban would reportedly impact LNG vessels that are tied to Qatar which is anchored in the Fujairah zone.

The UAE consumes around 1.8 billion cubic feet/day of gas via the Dolphin pipeline from Qatar and the dispute has left it exposed to reciprocal measures. The UAE may have to take replacement LNG supply, as a partial shutdown of the Dolphin pipeline would create waves through the global gas markets. So far, the spot LNG prices have not yet reacted.

Egypt is said to be less vulnerable than the UAE because it has no direct deals with Qatar, even after being heavily reliant on Qatari LNG. LNG traders are still uncertain about the potential impacts to deliveries from Qatar to Egypt.

Qatar is open to pushing volumes to Europe with the looming retaliatory measures like suspending LNG supply deals. Meanwhile, trade houses with any supply commitments to Egypt could turn to Nigeria, Algeria, or US for replacement cargoes.

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