As emergency workers sifted through the smouldering wreckage at Qatar’s Ras Laffan complex on Thursday morning, traders in Europe and Asia were waking up to a fresh energy crisis.
In normal times, a fifth of the world’s supply of liquefied natural gas (LNG) flows from Ras Laffan, a vast industrial site almost three times the size Paris built over three decades at a cost of hundreds of billions of dollars.
LNG terminals are some of the biggest and most complex constructions in human history, and Ras Laffan is the largest of them all, turning Qatar’s huge gas reserves into a super-chilled fuel that can be shipped around the world. At least before the Iranian missiles arrived.
“I woke up this morning and thought, ‘No, please no,’” said Anne-Sophie Corbeau, a former head of gas analysis at BP who is now at Columbia University’s Center on Global Energy Policy. “This has always been my nightmare scenario, my Armageddon scenario, the one I didn’t want to happen.”
Two gas traders said they were struggling to process the news after Iran launched a double-tap strike, firing ballistic missiles into the facility, first on Wednesday night then again in the early hours of Thursday morning. “This is unprecedented,” said one of the traders.
Gas prices in Europe rose 30 per cent as markets reopened and have more than doubled since the start of the war, as traders try to calculate the impact of months, or longer, without Qatar’s gas flowing to world markets.
Oil prices also jumped 10 per cent to almost $119 a barrel, due to fears of further strikes on energy supplies.
State-owned QatarEnergy, the operator of Ras Laffan, has so far confirmed “extensive damage” to Shell’s $18bn Pearl GTL plant, which turns gas into chemical feedstocks and fuels, and “several of its LNG facilities”.
Production at Ras Laffan had already been halted “as a precaution” last week, but traders assumed LNG flows would resume once the Middle East conflict eased and the Strait of Hormuz was safe for tankers to pass through.
Before this week’s strikes, gas prices had risen but stabilised far below the highs seen during Russia’s 2022 invasion of Ukraine.
The hope of a quick return to normality has now been undermined. The full extent of the damage remains unclear but satellites recorded a blaze on the scale of a major industrial disaster, raising the prospect that Ras Laffan could be offline for months.
Some analysts have warned that returning to full capacity could even take years, depending on the extent of the damage.
One trader said that gas prices in Europe would be pushed higher “through 2027” and that Europe would find it harder to refill its gas storage tanks this summer as Asian buyers snapped up LNG from the US to make up for the lost supply.
Asia was already facing shortages and rationing due to the loss of supply from the Gulf.
Europe, which has become more reliant on LNG since Russia slashed pipeline exports during its war with Ukraine, is now expected to be pitched into direct competition against countries such as Japan and South Korea for limited cargoes.
Analysts point out that Qatar’s total annual production was 110bn cubic metres of gas, almost equal to the loss of Russian pipeline supplies to Europe, which have fallen by 115bn cm.
Laurent Segalen, a clean energy investment banker, said: “It is apocalypse now. The coming months for gas importers are going to be a bloodbath.”
Traders fear a replay of 2022, when competition for cargoes sent natural gas prices into an upward spiral, eventually peaking at the equivalent of more than $500 a barrel in oil terms, and requiring wealthy governments to intervene to cushion the impact on consumers.
Ras Laffan has 14 gas liquefaction units that chill gas into 77mn tonnes a year of LNG, enough to meet the entire annual gas demand of Japan, or more than the UK and Italy combined.
It is not clear how many units have been damaged. Nevertheless, the specialised equipment to super-chill gas into LNG is incredibly complicated and will have to be painstakingly replaced, a job that will start only when Qatar is confident that workers can access the site safely, without fear of further attacks.
“What we can conclude immediately is that regardless of when the conflict now ends, a resumption of normal production from Qatar is not going to happen in a matter of weeks,” said Tom Marzec-Manser, an LNG expert at energy consultancy Wood Mackenzie.
He had previously estimated it would take around 40 days for Qatar to restart production at Ras Laffan, “but that cannot now be the case”.
Qatar’s plans to hugely expand Ras Laffan, adding a further six liquefaction units over this year and next, would also be delayed, he said. “There is an element of uncertainty, but we know now this is a months-long reduction in supply,” he added.
If Qatar does not produce any LNG for the rest of this year, the world would retreat to gas supply levels last seen in 2021, said Corbeau. “It is a five-year step back,” she said.
While some US projects are starting up shortly, there is no adequate compensation for Qatari gas that is “not politically very complicated”, she said, noting that some politicians had already been calling for a relaxation on bans on Russian gas.
Meanwhile, many countries are already starting to switch to coal-fired power generation, and some industrial sites across south-east Asia are having to ration their output or shut down. “The world of energy is going to fracture between the haves and the have-nots,” said Segalen.