Shell has announced that since the beginning of this year, approximately 36 million tons of LNG (liquefied natural gas) from the Middle East have exited the global market. This exit has occurred due to the escalation of military tensions in the region and disruption of LNG shipments through the Strait of Hormuz.
Impact on the Global LNG Market
Before the onset of the conflicts, about 20 percent of global LNG trade passed through the Strait of Hormuz. However, the restrictions imposed on this route have affected exports from Qatar and the UAE, reducing supply in international markets. This reduction in supply has led to a significant spike in prices, with the price of spot LNG cargoes in the Asian market, which was previously around $10 per million British thermal units, now nearing $30.
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Response to Rising Prices
The increase in LNG prices has impacted price-sensitive markets. Deepak Gupta, CEO of Indian company GAIL, noted that the sharp rise in prices has directly pressured demand in India. According to him, many industries in India will turn to alternative fuels due to the rising cost of gas.
In this regard, GAIL and PetroChina have dispatched their trading teams to various markets to find alternative cargoes to compensate for part of the supply shortfall from Qatar and the UAE since the war began. Luo Yizhou, CEO of PetroChina International, emphasized that the decline in LNG demand in China does not reflect a real decrease in the country's need for gas, but is mainly a result of the price surge.
The medium-term market outlook may also help alleviate price pressures. The CEO of GAIL has predicted that over the next four to five years, around 150 to 200 million tons of new LNG capacity will enter the global market. This increase in supply capacity could offset part of the current shortfall and, if geopolitical risks decrease, create conditions for price drops and the return of price-sensitive consumers.
ExxonMobil is also optimistic about the future of the LNG market. Andrew Brown, Vice President of Global LNG Marketing at the company, identified the development of LNG import infrastructure on the eastern coast of China and potential demand in other Asian markets as key factors for gas consumption growth in the coming decades.
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