Qatar has halted liquefied natural gas (LNG) production after its key facilities came under attack amid the escalating West Asia conflict, triggering supply disruptions to India and sharply squeezing feedstock availability for industry and city gas distribution (CGD) companies.
India, which relies on long-term LNG contracts with Qatar for a substantial share of its gas requirements, has seen cargo suspensions that have resulted in supply cuts of up to 40 per cent for industrial consumers and CGD operators.
Shipping paralysed as Strait of Hormuz closes
Petronet LNG Ltd, India’s largest LNG importer, has been unable to dispatch vessels to Qatar as the Strait of Hormuz — the critical maritime corridor for West Asian oil and gas exports — is virtually closed following the widening conflict.
Qatar has also shut down LNG production at the world’s largest export facility after it was targeted in an Iranian drone strike.
In a stock exchange filing, Petronet said it has sent force majeure notice to Qatari supplier, QatarEnergy for inability to send ships.
QatarEnergy too has served a force majeure notice for inability to serve its buyer - Petronet LNG - due to hostilities in the region.
"In light of the recent and ongoing war in the Middle East region involving Iran and Israel, vessels are presently unable to safely transit through the Strait of Hormuz to reach Ras Laffan, the loading port of QatarEnergy," Petronet said.
"Considering the prevailing security situation and the material risks posed to maritime navigation, the company (Petronet) has issued a force majeure notice to QatarEnergy in respect of its LNG tankers, namely Disha, Raahi, and Aseem."
Petronet said it has, in turn, issued corresponding force majeure notices to its downstream off-takers.
It has also issued force majeure notices on gas offtakers — GAIL, Indian Oil Corporation (IOC), and Bharat Petroleum Corporation Ltd (BPCL).
"Acts of war are also excluded under Business Interruption Insurance covers taken by Petronet LNG," it said.
"The likely impact of force majeure which is currently an ongoing event cannot be estimated at this point of time. The company is closely monitoring the developments and will keep the stock exchanges informed of any material updates in this regard."
QatarEnergy confirms production halt
In a statement, QatarEnergy said, "Due to military attacks on QatarEnergy's operating facilities in Ras Laffan Industrial City and Mesaieed Industrial City in the State of Qatar, QatarEnergy has ceased production of LNG and associated products."
Media reports suggest the conflict has effectively closed the Strait of Hormuz, a key conduit for global energy flows. Roughly one-third of the world’s seaborne crude oil exports and about 20 per cent of LNG shipments transit the narrow waterway. Around 20.8 million barrels per day of oil and products typically pass through the Strait, with over 80 per cent destined for Asian markets including India.
For India, the Strait — controlled by Iran — is the transit route for roughly 50 per cent of crude oil imports and around 54 per cent of LNG supplies, including shipments from Qatar and the UAE.
Shipping data indicate that just 26 vessels traversed the Strait after the US-Israeli strikes on Iran, compared with 91 on February 28 and a February daily average of 135 vessels.
CGD sector warns of severe stress
Qatar supplies 40 per cent of the 27 million tonnes per annum of LNG that India imports. Domestically produced natural gas meets only about half of total demand, with the balance met through LNG imports.
The supply squeeze has hit city gas firms particularly hard. While some industrial users can switch to alternative, though more expensive fuels, CGD operators have warned that replacing contracted Qatari LNG with spot cargoes — now priced at USD 25 per million British thermal unit, roughly double term contract rates — could erode CNG’s price competitiveness and permanently shift customers toward electric vehicles.
The Association of CGD Entities (ACE), in a March 3 letter to GAIL’s chairman and managing director, said the reduction in supply of low-priced gas to 60 per cent and restriction of spot or current market supply to zero "are likely to have a significant impact on gas availability to the sector, which may adversely affect the priority segments.
"We request clarity and confirmation regarding the sustained availability of gas to the city gas sector so that the sector can continue to serve the aspirations and objectives set by the Government of India for providing a reliable and sustained energy to smaller customer segments in the remotest corners of the country," it said.
Stating that the association members remain committed to supplying energy to households, CNG customers, small industries and commercial consumers, it sought "continued visibility and guidance on gas supply to the CGD sector during the crisis period.
"A line of confirmation about continuity of gas supply to the city gas sector during the crisis period will be helpful," it added.
India’s LNG exposure
Petronet has a long-term contract to buy 8.5 million tonnes per annum of LNG from Qatar and also procures additional Qatari volumes from the spot market. Besides Petronet, companies such as IOC have LNG import contracts with the UAE.
Petronet imports LNG in liquid form and regasifies it at its Dahej terminal in Gujarat and Kochi terminal in Kerala. The fuel is used for fertiliser production, power generation, and as feedstock for city gas entities.
Sources said GAIL and IOC are exploring spot market purchases to bridge the shortfall, but prices have firmed significantly amid the geopolitical turmoil.