US to Dominate World LNG
Market as Qatar Competition Weakens after Iran Attacks
Before
the war, the global market for liquefied natural gas was increasingly commanded
by just two countries, one of which has now been hobbled.
·
The
ongoing conflict in the Persian Gulf has exposed a major structural
vulnerability in the global Liquefied
Natural Gas (LNG) market, which has become increasingly
dependent on two suppliers — the United States and Qatar.
·
For
years, Asian energy importers, particularly Japan, had expressed concerns about
excessive reliance on these two countries for future LNG supply growth.
·
In
February 2026:
o Iran blocked the Strait of Hormuz.
o Iranian strikes damaged Qatar's Ras Laffan
Industrial City, the world's largest LNG export complex.
·
The
disruption removed approximately 20%
of global LNG supply from the market.
·
The
damage to Ras Laffan is expected to take years to repair, limiting Qatar's
export capacity even if shipping routes reopen.
·
Asian
countries heavily dependent on Qatari LNG faced immediate supply shortages and
soaring gas prices.
·
Countries
most affected include:
o Pakistan
o Bangladesh
o India
o Singapore
o Taiwan
·
Consequences
include:
o Power shortages.
o LNG rationing.
o Increased reliance on coal-fired power
generation.
o Energy conservation measures.
·
Qatar's
LNG expansion began in the early 1990s following a major supply agreement with
Japanese utility companies.
·
Development
of the massive North Field gas reserves enabled Qatar to:
o Become the world's largest LNG exporter by
2006.
o Build the Ras Laffan industrial complex,
one of the largest gas-processing hubs globally.
·
Strong
global demand for cleaner-burning natural gas helped drive Qatar's rapid
economic growth and energy dominance.
·
The
United States transformed from a projected LNG importer into the world's
largest LNG exporter through:
o Hydraulic fracturing (fracking).
o Horizontal drilling technologies.
·
Large-scale
LNG export terminals along the Gulf Coast enabled exports to Europe and Asia.
·
By
2023, the United States had overtaken Qatar as the world's largest LNG
exporter.
·
The
dominance of the U.S. and Qatar intensified as other competitors weakened:
o Russia faced sanctions that limited
expansion.
o Australia experienced production
constraints and stricter environmental policies.
o Malaysia and Indonesia increasingly
consumed more gas domestically.
·
By
2030, the U.S. and Qatar were expected to control around half of global LNG supply.
·
The
concentration of supply in two countries created risks of:
o Supply disruptions.
o Price shocks.
o Geopolitical leverage over importing
nations.
·
Japan
has long pursued diversification strategies through companies such as JERA to
reduce dependence on a limited number of suppliers.
·
With
Qatar's exports severely disrupted, the United States is expected to become the
dominant LNG supplier over the coming years.
·
However,
U.S. export expansion projects will not be able to fully replace lost Qatari
volumes in the near term.
·
LNG
markets are therefore expected to remain tight for several years.
·
Importing
countries are likely to accelerate diversification efforts.
·
Producers
in:
o Australia
o Norway
o Canada
are
expected to increase production to fill part of the supply gap.
·
India,
which relies significantly on LNG imports, faces:
o Higher energy costs.
o Potential gas supply constraints.
o Increased use of alternative fuels such as
coal.
o Greater urgency to diversify energy
sources and suppliers.
·
The
crisis also highlights the importance of:
o Expanding domestic energy production.
o Strengthening strategic energy reserves.
o Diversifying import routes and suppliers.
·
The
disruption of Qatar's LNG exports has revealed the risks of an increasingly
concentrated global LNG market. With one of the world's two major LNG suppliers
partially sidelined, Asian economies face supply shortages, higher energy
costs, and renewed concerns over energy security. The episode is likely to
accelerate efforts to diversify global LNG supply chains while increasing the
strategic importance of U.S. LNG exports in the years ahead.
Years before the war in the Persian Gulf,
executives in boardrooms across Japan were discussing a development they feared
posed a growing risk to Asia’s energy supplies.
The global trade in liquefied natural gas,
the supercooled fuel that underpins power generation across Asia, was hardening
into a duopoly. Just two nations — the United States and Qatar — were poised to
account for the vast majority of supply growth by 2030.
Anxiety was high in Japan because it’s the
largest L.N.G. importer behind China. The concern was that a market dominated by
two powerful suppliers could disadvantage buyers and leave Japan vulnerable should
either pillar falter. The United States was viewed as politically unpredictable,
especially after the Biden administration paused permits for new export facilities
in 2024.
And Qatar sat in one of the world’s most
volatile regions.
In February, those fears were realized. That
month, Iran blocked the Strait of Hormuz, the waterway through which Qatar ships
virtually all of its L.N.G. to the rest of the world. Two weeks later, Iranian strikes
hit Qatar’s Ras Laffan L.N.G. hub, inflicting damage that could take years to repair.
The disruption immediately knocked about
a fifth of global L.N.G. supply off the market. In Asia, the destination for most
of Qatar’s exports, gas prices skyrocketed. Pakistan, Bangladesh, India, Singapore
and Taiwan were among those in Asia getting anywhere from a third to nearly all
of their L.N.G. from Qatar. The rug had been pulled out from under them.
It is easy, in hindsight, to say countries
should have been better prepared, said Henning Gloystein, a managing director for
energy at Eurasia Group, a political risk research firm. Yet significant energy
supply disruptions occur virtually every decade, he said, and the industry’s growing
reliance on just two suppliers had created a structural vulnerability.
“The industry was too concentrated,” he said.
“Now, of the two big players, half are out of the market.”
Carved
Out of the Desert
Qatar’s ascent to the top of the global L.N.G.
industry began in 1992 when Chubu Electric, a Japanese utility, was scouring the
globe for the four million metric tons of liquefied natural gas needed to fuel a
new domestic power plant.
Finding traditional suppliers tapped out,
Chubu turned to Qatar, then an oil-dependent nation mired in debt. Though sitting
atop the world’s largest natural gas field, Qatar needed enormous investment to
build the infrastructure required to liquefy gas for export.
For Qatar, the Japanese supply deal was transformative.
The contract enabled the country to secure international bank loans needed to construct
its first L.N.G. trains — the giant industrial processing units that liquefy gas.
From there, Qatar became a primary supplier
in a rapidly expanding global market. Around the world, industrialized nations increasingly
viewed natural gas as a critical bridge fuel, helping them move away from the more
carbon-intensive coal while building toward a future powered by renewables. The
worldwide demand for L.N.G. surged to more than 220 million metric tons by 2010,
up from 55 million in 1990.
North of Doha, the Qatari capital, the authorities built Ras Laffan, an industrial city that today contains
more than 100 square miles of gas-processing and liquefaction infrastructure. Visitors
permitted inside the heavily guarded complex describe it as a dizzying labyrinth
of steel rising from the desert.
The L.N.G. boom propelled Qatar’s annual
economic growth above 10 percent for years. By 2006, Qatar had surpassed Indonesia
to become the world’s largest L.N.G. exporter, a distinction it comfortably held
for much of the past two decades.
Fracking
Boom Takes America
In the United States, policymakers spent
much of the early 2000s fearing the country was running out of domestic gas and
building enormous import terminals. But starting around 2008, hydraulic fracturing
and horizontal drilling helped unlock immense resources previously trapped in shale.
The refinement of those technologies transformed
the United States into a major exporter. Across the Permian Basin and the Marcellus
Shale, new gas projects fed terminals in Texas and Louisiana that liquefied natural
gas for shipment to Europe and Asia.
Throughout the 2010s, the U.S. fracking boom
incited public backlash over issues like contaminated groundwater and gas leaks,
but the L.N.G. surge carried forward as regulators refrained from halting permits
for large and lucrative export projects. By 2023, the United States had overtaken
Qatar as the world’s top exporter.
Around the same time, the duopoly was also
being cemented as rivals receded. Russia’s plans to expand its gas sector were stalled
by Western sanctions. Australia saw production plateau amid tightening environmental
regulations and domestic supply mandates. Legacy Southeast Asian exporters such
as Malaysia and Indonesia began consuming more of their own gas at home and exporting
less.
That left two countries — Qatar and the United
States — to divide an expanding global market. Both embarked on major production
expansions. In 2019, Qatar announced plans for new wells and L.N.G. trains that
would nearly double its export capacity by 2030.
Meanwhile, a new wave of projects sprang
up along the American Gulf Coast that the U.S. Energy Information Administration
expects will more than double American L.N.G. export capacity by 2029. By the end
of the decade, Qatar and the United States are expected to control about half of
the world’s total supply.
This dynamic has raised red flags in Japan
for years. With the market increasingly concentrated in just two countries, importers
faced the risk of sudden supply disruptions or the wielding of exports as geopolitical
leverage. Japan has sought to diversify its liquefied natural gas portfolio, leaning
heavily on Jera, a joint energy venture between two of the country’s biggest electric
utilities, created in 2015 in part to achieve the scale needed to secure a broader
array of supply lines.
Rise
of a Near Monopoly
Now, one of the two global pillars of L.N.G.
supply has been hobbled, with the Strait of Hormuz shut and Qatar unable to export.
Even if the waterway reopens, production is likely to remain impaired for years
because of structural damage at Ras Laffan. The expansion project, already behind
schedule, is also likely to face further delays.
Countries heavily dependent on Qatar are
struggling. Pakistan, which gets nearly all of its L.N.G. from Qatar, is enduring
power blackouts. Vietnam and India are rationing gas and reverting to coal-fired
generation. Even wealthier countries such as Singapore, which relies on Qatar for
roughly a quarter of its L.N.G. imports, have issued sweeping energy-conservation
guidelines.
American officials have sought to seize the
moment. At an Asian energy forum in Tokyo in March, Interior Secretary Doug Burgum
used the Middle East energy crunch to pitch U.S. suppliers. “We have energy to allow
for prosperity at home, and the ability to sell energy to friends and allies across
the Pacific,” Mr. Burgum said. Now, he told gathered business and government officials,
“You don’t have an alternative.”
In reality, while American companies are
racing to bring new export capacity online, those efforts will fall far short of
offsetting the near-term loss of Qatari gas. Even after the strait reopens, supplies
are likely to remain tight for years.
Parts of Asia are likely to continue rationing
power. Eurasia Group’s Mr. Gloystein also expects a rush
to diversify supply lines, with producers in countries like Australia, Norway and
Canada scrambling to bring additional output online as quickly as possible.
Qatari production will eventually recover,
but for the next few years, the industry is likely to shift from a duopoly-like
structure toward one dominated by the United States, Mr. Gloystein
said. “The U.S. will play a very, very dominant role.”
For gas importers already concerned that
American energy exports could be used as leverage in trade disputes and diplomatic
negotiations, the prospect is troubling. “That’s a very legitimate concern, which
I think will reappear in the next two years,” Mr. Gloystein
said.