Drone strike on key Qatari plant reignites global gas crunch fears

A drone strike on a critical Qatari energy hub has sent global gas prices surging, handing a potential windfall to some of Australia’s largest liquefied-gas exporters but reigniting worries of spiking energy costs reaching households and pushing up inflation.

The Iranian attack, which forced Qatar’s state-owned energy company to shutter a facility that accounts for one-fifth of worldwide liquefied natural gas (LNG) supplies, sent European gas prices soaring 50 per cent on Tuesday and sent shockwaves through markets already jittery about the widening conflict in the Middle East.

LNG prices in Asia are up more than 30 per cent this week already, which could benefit Australia’s giant LNG exporters such as Woodside Energy if the increases hold, analysts said.

LNG – natural gas chilled into liquid form to be loaded onto ships and dispatched around the world – is one of Australia’s most lucrative exports, accounting for more than $50 billion in earnings a year.

Australia is the third-largest LNG exporter, while Qatar is the second-largest, behind the United States.

If the Qatari shutdown is not lifted quickly, or critical infrastructure at the plant is damaged, it could ignite a “larger market shock than in 2022” when Russia turned off its pipeline gas to Europe and unleashed an unprecedented gas crisis, analysts said.

LNG prices could rise “several-fold”, MST Financial analyst Saul Kavonic said, and could “retest their 2022 highs”.

However, any price surge could also drag costs higher for Australia’s millions of gas-reliant homes and businesses, as LNG swings partly influence the prices of local supply contracts. Soaring coal and LNG prices in 2022 ultimately contributed to a double-digit electricity bill blowout in Australia and pushed energy-intensive manufacturers to the brink.

Shares in Woodside and Santos, the two largest Australian LNG exporters, jumped more than 6 per cent this week following the closure of the Strait of Hormuz, a major choke-point for about a third of the world’s oil tankers. Although there is no formal blockade, tankers remain anchored due to heightened security and insurance risks, intensifying supply concerns.

Most of the natural gas exported through the Strait of Hormuz is destined for Asia, particularly China, analysts at commodities research firm ICIS said. Asian buyers would now need to compete for available cargoes from US and Australian suppliers, pushing up prices.

“This is likely to increase competition for flexible LNG cargoes and drive global prices higher,” they said.

Rick Wilkinson, chief executive of consultancy EnergyQuest, said Australian LNG producers would benefit from their reputation as reliable suppliers and their location near major buyers in Asia. However, he said Australian producers’ ability to fill the LNG gap in Asia left by Qatar was limited.

“Australia is already at capacity, with just a few swing cargoes possible.” Wilkinson said.

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