Qatar Shuts Down LNG Production as War Escalates

The US campaign has widened into a regional conflict, drawing in the assets and infrastructure of US-aligned Gulf states. On Monday morning, Qatar shut down liquefied natural gas production after Iranian strikes expanded to Qatari energy infrastructure.

Why it matters: Qatar is the world’s largest single producer of LNG, and a shutdown could last weeks or months, depending on the extent of the damage and the length of the shutdown. If only a few days and no major damage, it could be back up and running within a few days. Longer, and it could take weeks.

• EU storage is low, as cold weather depleted stockpiles, with an expectation of plenty of supply in 2026 as new American and Qatari production comes online. The EU will be competing with Asian buyers who consume Qatar’s volumes.
• If tensions ease and trade can resume, we expect Qatar to quickly ramp up production, as its economy is heavily reliant on LNG exports. This war is not analogous to Ukraine, which created a multiyear disruption and total phase-out of Russian energy.

The bottom line: We maintain our $3.30 Henry Hub midcycle price and our fair value estimates for Cheniere Energy, Cheniere Energy Partners, and Venture Global. An extended shutdown or further attacks on the idled LNG facility would change our outlook, but it is not our base case.

• Iran is also heavily reliant on safe shipping channels for its own crude. That being said, it is unlikely to allow others to trade freely if it remains under attack and its own ships are harried. Increases in insurance rates for ships passing through will reflect this risk.
• The impact may ultimately be that buyers secure alternative volumes to diversify and protect against supplier disruptions and conflict risks. Despite the low cost of gas, Qatar may become a victim of its position in a perceived volatile region.