Global Gas Shortage Intensifies: Asian Premium Forces EU Energy Supply Restructuring

On March 26, the natural gas crisis may be larger and more severe in its impact than the oil crisis the market fears. QatarEnergy announced force majeure on some of its liquefied natural gas contracts on Wednesday. According to market sources, Santos of Australia suspended its Barossa gas field project, which could affect around 3.7 million tonnes of downstream capacity at the Darwin LNG plant. The liquefied natural gas facilities of QatarEnergy suffered fires due to attacks, with repairs possibly taking years, and its output accounts for more than 15% of the world's total natural gas capacity. As for Santos’s Barossa project, equipment is currently being replaced and a restart is expected to take at least several weeks.

This impact is especially significant for Asian countries, as nearly 80% of Asia's energy supply comes through the Strait of Hormuz. Since the US-Iran conflict erupted on February 28, Asian natural gas prices have soared by 143%, and European natural gas prices have also increased by 85%. Although these price levels remain below the peaks following the 2022 Russia-Ukraine conflict, analysts have pointed out that the current supply situation is actually much worse than in 2022. For example, China’s semiconductor manufacturing region of Taiwan reported on Tuesday that its natural gas supply could only last for 11 days. The elevated natural gas prices in Asia also caused some cargoes of liquefied natural gas destined for Europe to be rerouted. Laura Page, LNG and Gas Insight Manager at Kpler, pointed out that indeed 11 LNG cargoes were rerouted from Europe to Asia, two more from Europe to Egypt, and one from Europe to Turkey.