QatarEnergy’s force majeure declaration on LNG exports has put Asian buyers into a predicament of having to replace about a fifth of their contracted LNG supply (or a quarter when including spot imports).

As the Iran-US war rages on with no imminent end in sight to the effective closure of the Strait of Hormuz, news headlines have focused on the LNG volumes Qatar exports to Asia.

However, the true extent of the supply disruption is assessed by the share of Qatari LNG in each market’s total gas supply and gas’ share of their energy mix.

Among Asian buyers, the South Asian economies are most exposed to Qatari LNG, with the emirate accounting for 45-99% of their LNG imports and around 20% of gas supply.

However, domestic gas prices are heavily subsidised by their respective governments, so these markets are highly price-sensitive in their appetite for spot LNG.

While India can partially offset the Qatari LNG shortfall with coal, gas-dependent Bangladesh and Pakistan have activated gas rationing measures amid a lack of alternative fuel sources and skyrocketing spot LNG prices.

Elsewhere, South Korea (via KOGAS), Taiwan (via CPC), and Singapore (via Shell after Pavilion Energy acquisition) rely on Qatari LNG for 15-35% of their total gas supply. These buyers’ exposure to the spot LNG market is likely to grow substantially because gas accounts for at least a quarter of the power mix in all three countries.

In particular, Singapore generates 90% of its electricity from natural gas and has limited capacity to switch to coal or other fuels for power generation. The island imports all of its gas supply, of which close to 60% is from LNG and the remaining via pipelines from Malaysia and Indonesia.

Similarly, gas is Thailand’s primary power generation fuel (60% of power mix). However, Qatar accounts for just 6% of its total gas supply, primarily from a 2 mtpa term deal with PTT. This is equivalent to two to three conventional-sized LNG cargoes per month.

Despite their status as the two largest LNG importers, China and Japan’s exposure to Qatari LNG in their gas supply mix is relatively limited, at just 6% and 5% respectively. To mitigate the Qatari LNG shortfall, importers in both markets can switch to alternative fuels like coal or optimise within their gas and LNG portfolios.

The main buyers of Qatari LNG in China (CNOOC, PetroChina, and Sinopec) and Japan (JERA, Kansai Electric) have flexible term LNG volumes from the US and Australia, which may be used to at least partially offset the Qatari LNG shortfall.

Source: Vortexa