The war in the Middle East could trigger a global economic shock if it continues for weeks, with Gulf energy exporters potentially forced to halt production and oil prices surging to $150 a barrel, Qatar’s energy minister Saad al-Kaabi told the Financial Times.
Kaabi said the conflict could force energy producers across the Gulf region to declare force majeure and suspend deliveries if hostilities continue.
“Everybody that has not called for force majeure we expect will do so in the next few days that this continues. All exporters in the Gulf region will have to call force majeure,” Kaabi told the Financial Times. “If they don’t, they are at some point going to pay the liability for that legally, and that’s their choice.”
Global economic consequences could follow
Kaabi warned that prolonged disruptions to Gulf energy exports could affect the broader global economy.
“This will bring down the economies of the world,” he told the Financial Times. “If this war continues for a few weeks, GDP growth around the world will be impacted. Everybody’s energy price is going to go higher.”
He said disruptions in energy shipments could also affect multiple industries because Gulf producers supply large volumes of petrochemicals and fertiliser feedstocks used in manufacturing.
“There will be shortages of some products and there will be a chain reaction of factories that cannot supply,” Kaabi said.
Drone strike forces shutdown at Qatar LNG facility
Qatar, the world’s second-largest producer of liquefied natural gas (LNG), declared force majeure this week after an Iranian drone strike hit its Ras Laffan facility, the country’s largest LNG plant.
Kaabi said the government and QatarEnergy were still assessing the extent of the damage to the facility.
“We don’t yet know the extent of the damage, as it is currently still being assessed. It is not clear yet how long it will take to repair,” he told the Financial Times.
Even if hostilities stopped immediately, Kaabi said it would take “weeks to months” for Qatar to restore normal export operations because of logistical disruptions.
“Our ships are all over the place,” he said, adding that only six or seven vessels from Qatar’s fleet of 128 LNG carriers were currently available to load cargo.
Strait of Hormuz disruption could push oil to $150
Kaabi said energy markets could face severe disruptions if maritime traffic through the Strait of Hormuz remains blocked.
He forecast that crude prices could reach $150 a barrel within two to three weeks if tankers and other vessels remain unable to pass through the strategic waterway.
About one-fifth of global oil and gas shipments transit the Strait of Hormuz, a narrow maritime route linking the Persian Gulf with international shipping lanes.
Kaabi also warned that natural gas prices could rise to $40 per MMBtu if supply disruptions persist, nearly four times the levels seen before the war began.
Traffic through the strait has slowed significantly since the United States and Israel launched military strikes on Iran, according to the Financial Times. At least 10 ships have reportedly been hit, insurance costs have surged and shipping companies have become reluctant to send vessels through the region.
Qatar expansion plans face delays
The conflict could also delay Qatar’s large-scale expansion of production capacity at the North Field gas field.
The $30 billion project aims to increase Qatar’s LNG production capacity from 77 million tonnes per year to 126 million tonnes by 2027.
Kaabi told the Financial Times that the expansion timeline would be affected by the conflict.
“It will delay all our expansion plans for sure,” he said, adding that the impact would depend on how long the war continues. The first new production from the project had been scheduled to begin in the third quarter of this year.
Safety concerns force production shutdown
Kaabi, who is also chief executive of QatarEnergy, said the company halted production primarily for safety reasons following warnings of potential attacks.
“We were actually informed by our military that there is an imminent threat on the facilities offshore,” he told the Financial Times.
The company evacuated approximately 9,000 workers from its operations within 24 hours after the strike.
“When we have our people in danger and we’re actually being hit in a military zone and we can’t work anymore, and we can’t put our people in harm’s way, we have to declare force majeure,” Kaabi said.
He added that production would not restart until military authorities confirm that hostilities have stopped.
“So the signal is when our military says there is a complete stop of hostilities and we are not being attacked anymore. We are not going to put our people in harm’s way,” he said.
Regional tensions escalate around energy infrastructure
Qatar hosts the largest US military base in the region and has historically maintained diplomatic relations with Iran.
However, Iran has launched multiple waves of missiles and drones targeting energy infrastructure, airports, US military facilities and embassies across the Gulf during the ongoing conflict.
Kaabi said shipping companies remain reluctant to send vessels through the Strait of Hormuz because of the risks involved.
“The way that we are seeing the attacks, bringing ships into the strait… it’s too dangerous,” he told the Financial Times. “It’s too close to the shore to bring ships in.”
Qatar defends reliability as LNG supplier
Despite declaring force majeure, Kaabi rejected suggestions that Qatar’s reputation as a reliable LNG supplier could be damaged.
“We don’t think anybody would dare to come to us and say we are not reliable because you were being bombed and you did not deliver,” he told the Financial Times.
He added that Qatar would not be able to procure replacement supplies in the global market even if it wanted to fulfil its delivery commitments.
“Let’s assume you want to buy 77 million tonnes and deliver it to customers. There is no 77 million tonnes lying around for you to buy,” he said.
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