Ras Laffan attack raises spectre of prolonged LNG supply disruption

OSLO: Severe damage to Qatar’s Ras Laffan LNG complex is likely to prolong supply disruption well beyond initial expectations, with traders and analysts now warning of the potential for a sustained outage and extended gas price volatility.

Questioned by specialist energy news outlet, Montel News, Tom Marzec-Manser, Director of European gas and LNG at Wood Mackenzie said: “The extensive damage sustained by trains at Ras Laffan means even once the Iran conflict ends and the Strait of Hormuz reopens, Qatari LNG production will not fully return within the few weeks previously envisaged.”

“[It could] easily take months for nameplate capacity to return,” he added.

Europe’s benchmark front-month gas contract on the Dutch TTF hub was last seen up 17% at EUR 64/MWh. It traded as high as EUR 74/MWh earlier in the session, its highest since January 2023.

Forward markets also appeared to start pricing in the threat of prolonged disruptions, as TTF prices also rose further along the curve, with the 2027 contract last seen up 17% at EUR 45.6/MWh and the 2028 contract last seen trading 12% higher at EUR 30.3/MWh.

Geopolitical Energy Analyst at Montel, Andres Cala said: “Confidence, unlike infrastructure, cannot be quickly rebuilt. Even if repairs are finished this year, which is far from certain, buyers will be wary of prices and geopolitical risks to supply. Prices averaging between EUR 60-100/MWh in the TTF this year couldn’t be ruled out, depending on the specific details on infrastructure damage.”

Andreas Schroeder, Head of Energy Analytics at ICIS agreed the attack implied markets would “face an outage of the LNG facility for longer than previously expected”.

The market would now “price in a longer duration” of the Iran conflict, he said.

Reacting out of fear
“The market is reacting out of fear,” said Fabio Reale, head of LNG analytics at shipping company Clarksons. He said there were no confirmed reports of the exact nature of the damage caused.

“If damage is minimal… the market will still price the risk of further attacks to the plant [but] if the damage is substantial, meaning it will take several months or years to be fixed, then it’s a game changer,” he said.

Reale said a prolonged absence of Qatari LNG would lead Europe to maximise gas pipeline exports from Norway, Algeria, Libya and Azerbaijan, with pressure from certain European countries to resume Russian pipeline deliveries and scrap the LNG ban.