Iran war damage to Qatar hits global LNG outlook, upends Asia demand growth
The Iran war is upending the global LNG outlook as soaring prices, damage to major supplier Qatar’s export infrastructure and potential delays to new supply raise doubts about previously expected demand from price-sensitive Asian buyers.
Before the war, analysts expected global liquefied natural gas (LNG) supply to rise as much as 10 per cent in 2026 to between 460 million tonnes and 484 million tonnes as new capacity, mainly in the US and Qatar, came online, with demand forecast to grow in tandem.
Now, Iran’s blocking of the Strait of Hormuz, which handles 20 per cent of global LNG flows, and damage to Qatar’s liquefaction trains – sidelining 12.8 million tonnes per year of LNG for three to five years – have prompted consultancies S&P Global Energy, ICIS, Kpler and Rystad Energy to cut global supply outlooks by as much as 35 million tonnes.
That is equal to about 500 LNG cargoes – enough to meet more than half of Japan’s annual imports or Bangladesh’s for five years.
“We expect this gas price crisis will lead some countries to reconsider growing their gas demand at the rate we previously forecast and so LNG demand growth will be lower than our pre-war forecast,” said S&P Global Energy analyst Lucien Mulberg.
S&P Global Energy expects a 33 million tonne drop in exports out of Qatar and the United Arab Emirates in 2026, and trimmed projected supply by a further 19 million tonnes each year from 2027 to 2029 due to expected delays at Qatar’s North Field expansion and ADNOC’s Ruwais LNG projects under construction.
Soaring LNG prices
With the supply shock, Asia LNG prices have jumped 143 per cent since the US-Israeli war with Iran began on Feb 28, the second major spike in four years following Russia’s invasion of Ukraine.
At a more than three-year high of US$25.30 per million British thermal units (mmBtu), prices are well above the US$10 per mmBtu threshold at which emerging market demand picks up, and analysts see prices remaining above that comfort zone through 2027.
Rabobank expects Asia prices to average US$16.62 per mmBtu in 2026 and US$13.60 in 2027, while UBS raised its forecast to US$23.60 per mmBtu for 2026 and to US$14.50 for 2027.
“In the near term, the market rebalances primarily through higher prices and demand destruction in South Asia,” said Ms Laura Page, manager of LNG Insight at Kpler.
Demand shrinks in South and South-east Asia
Roughly 80 per cent of Qatar’s LNG supply goes to Asia. Price-sensitive buyers such as Bangladesh and India are seeking replacement LNG supplies while switching fuels to coal and domestic gas.
Pakistan, which heavily relies on Qatar for LNG, is rationing energy through a four-day work week.
Demand is shrinking in energy-intensive sectors like fertilisers and textiles. “There is a demand destruction process going on,” said Mr Iqbal Ahmed, chairman and chief executive of Pakistan GasPort, which co-owns an LNG import terminal.
In India, petrochemical and ceramic production has also been hit, said industrial players.
The US, the world’s largest LNG exporter, is unlikely to fill supply gaps, as American export plants are running nearly at full capacity, with most of their volumes locked into long-term contracts.
“There’s just no way to easily replace the lost volumes, and no amount of portfolio optimisation or cargo swaps will bridge the gap between the lost supply and current demand… which is a significant blow to energy security for those countries that are relying on those volumes,” said Mr Seb Kennedy, independent analyst at Energy Flux News.
The crisis could spur a renewed push in Asia for domestic energy alternatives, leading to permanent LNG demand destruction, said Mr Sam Reynolds, LNG research lead at pro-renewables think-tank IEEFA.
China undaunted
Top buyer China had already been easing reliance on LNG.
Imports grew rapidly for a decade before Beijing shifted focus to domestic gas production, higher Russian pipeline imports and renewable energy.
A Chinese state gas trader said steady growth in domestic gas production, more gas via the Power of Siberia pipeline and ongoing volumes from Russia’s Arctic LNG 2 project will more than offset the loss of Qatari shipments, which account for 6 per cent of China’s roughly 400 billion cubic metres of annual gas use.
However, in less price-sensitive markets like second- and third-placed importers Japan and South Korea, the war is unlikely to materially change gas procurement plans given a lack of significant domestic production or piped gas access.
JERA, Japan’s biggest LNG buyer, said Qatar remains a reliable supplier and its contracting approach will not change.
“I don’t think the fundamental fact that the Middle East – and Qatar in particular – plays an important role will change,” said executive Ryosuke Tsugaru.
=== Reuters ===
