Israel’s war against Hamas has created yet another turning point for North American LNG projects working to advance, particularly those in the United States, as they look to seize momentum and pitch buyers on the energy security they can provide in an increasingly volatile market.
The United States and Qatar are set to drive the world’s liquefied natural gas supply growth through the end of the decade. The conflict in the Middle East comes after a record stretch of long-term contracting for U.S. projects that was driven by Russia’s move to cut gas exports to Europe after it invaded Ukraine last year.
Qatar has seen a similar level of interest in its North Field LNG expansion project. The country has signed three supply deals to provide 8 million metric tons/year (mmty) since Hamas’ Oct. 7 attack on Israel. QatarEnergy now has over 40% of the project’s volumes committed, and management has said it could finish contracting this year.
But the conflict has thrust gas-rich Qatar into a delicate role as an intermediary for the United States and other nations working for the release of more than 200 hostages being held by Hamas. Qatar’s ties to Hamas also could give North American LNG projects a competitive advantage with buyers looking to avoid the political and logistical risks associated with Qatar’s position in the Middle East.
“We’ve made this pitch to energy ministries in Europe and elsewhere, U.S. LNG is safer by a number of counts,” said Glenfarne Energy Transition LLC’s Adam Prestidge, head of legal and corporate affairs for the company’s natural gas business. Glenfarne is working to develop the Texas and Magnolia LNG export projects on the Gulf Coast.
“The political stability is obvious. The shipping lanes are direct and avoid potential conflict areas. The public policies, humanitarian values and” environmental goals “are more aligned with Western Europe and developed Asia,” he told NGI. “I think any kind of conflict highlights the benefits of buying energy from the United States.”
Henry Hub-indexed supply deals, driven overwhelmingly by U.S. export projects, accounted for 70% of all the LNG contracts signed globally last year. They’ve accounted for over half of this year’s deals, as well.
The United States already has 94 mmty of liquefaction capacity operating and another 79 mmty currently under construction.
Qatar’s North Field project would boost the country’s output from current levels near 80 mmty to 125 mmty by the end of the decade. Australia, Qatar and the United States provided 60% of the world’s LNG supplies last year, but Australia’s output is expected to decline in the coming years before new projects there enter service.
‘A Knife’s Edge’
The flood of contracting since last year was largely driven by high spot prices and the need to replace Russian natural gas.
“Energy security is balanced on a knife’s edge, and pretty much anything can tip it in one direction or another,” LNG Allies CEO Fred Hutchison told NGI.
Prestidge said the conflicts in Ukraine and Israel have given potential U.S. LNG customers a “long-term appreciation” for LNG and its ability to better balance energy markets during times of upheaval and the energy transition.
Hutchison noted that contracting momentum has brought many proposed North American projects close to selling out of capacity.
The CP2, Delfin and Saguaro LNG projects have sold nearly 90% or more of their offtake. Saguaro would be located in Mexico, but the facility would utilize U.S. feed gas. Other U.S. projects, such as Lake Charles LNG and expansions at the Sabine Pass and Cameron facilities have sold one-third or more of their supplies.
Hutchison said he expects both Asian and European buyers to keep stepping up for the remaining volumes.
Meanwhile, Israel continues to bombard Gaza with airstrikes. Its ground invasion has not started.
The conflict forced Chevron Corp. to shut down the Tamar gas field offshore Israel, which has limited feed gas for Egyptian LNG terminals and appears to have impacted some cargo loadings.
While the effect on the global gas market has been negligible so far, if the conflict continues and spills over Israel’s borders, it could pose problems for other LNG suppliers in the region like Qatar.
Regional Risks
All of Qatar’s exports pass through the Strait of Hormuz between the Persian Gulf and Gulf of Oman, where cargo traffic depends on Iran’s cooperation.
“Since Iran tends to retaliate against the United States and Israel by messing with trade in the Gulf, any threat to Iran is by proxy a threat to Qatari exports,” said Jim Krane, a research fellow and co-director of the Middle East Energy Roundtable, at Rice University’s Baker Institute for Public Policy.
European plans to import more LNG from Qatar also are drawing criticism over the country’s perceived role as a sponsor of Hamas, which the United States, Israel and European Union all consider a terrorist group.
Qatar has hosted Hamas’ political office in Doha for more than a decade. The country is also home to Hamas operatives, including a financier that the United States sanctioned last week.
Qatar has worked to mitigate those political risks with key partnerships across the world, including with the United States. It ultimately could distance itself from the conflict, but that could prove difficult given anti-Israeli sentiment throughout much of the Gulf region.
“At some point, if this thing continues to spiral, the Qataris will have to come out strongly on one side or the other, which I’m certain is a horrific thought,” said Brad Hitch, a former LNG trader and NGI special contributor. “If I were them, I would try to sit on the fence as long as possible.”
The Washington Post first reported Thursday that the United States and Qatar have agreed to reevaluate Qatar's relationship with Hamas after a recent meeting in Doha between U.S. Secretary of State Antony Blinken and the emir of Qatar, Sheikh Tamim bin Hamad al-Thani.
To be sure, Qatar has enormous reach in the global gas trade. Its low-cost supply, proximity to leading markets and integrated operations make it an attractive option for buyers looking to secure more cargoes.
That’s been evidenced by the nearly 30-year supply deals it’s recently signed underpinning the North Field expansion project. Qatar also has long avoided politicizing its energy relationships.
“Qatar needs de-escalation of the Israeli-Hamas conflict,” Krane told NGI. “The last thing Qatar, the UAE, Saudi Arabia or Kuwait want to see is increasing pressure on Iran that results in another ramp-up of Iranian mischief in the Gulf.”
The regional risks ultimately could push potential buyers to reassess their options, according to Anna Mikulska, a nonresident fellow at the Baker Institute. Given the amount of permitted LNG infrastructure projects in the United States, she said those assets are “well-positioned” to get a closer look.
Hitch agreed.
“If you are sitting in Asia or Europe, you would have to be thinking that you need to ensure you have alternatives.”
