Qatar has halted liquefied natural gas production at its world's largest export facility following Iranian drone attacks, confirming the worst-case scenario for Indian energy supplies. As reported by ETEnergyworld, Qatar supplies 40% of India's 27 million tonnes annually of LNG imports, making this disruption particularly severe for the country's energy security. The crisis has effectively closed the Strait of Hormuz, a key shipping route through which about 20% of global LNG shipments typically transit, with vessel traffic dropping to just 26 vessels compared to the February average of 135 vessels per day. According to PTI, shipping through the Strait of Hormuz -- the narrow sea lane that carries about one-fifth of the world's oil and large volumes of liquefied natural gas (LNG) -- has slowed to a near halt following US and Israeli attacks on Iran and Tehran's retaliatory strikes. Goldman Sachs reports that the strait handles around 20 million barrels of oil and 19% of global LNG trade daily, making it one of the world's key chokepoints.
GAIL (India) Limited has confirmed that its allocation of LNG from Petronet LNG Limited has been reduced to zero with effect from March 4, following the supplier's force majeure declaration. In a regulatory filing, GAIL stated that Petronet LNG issued the force majeure notice on March 3 under the Gas Sale and Purchase Agreement, citing constraints faced by certain LNG vessels during transit between India and Qatar. The company explained that the notice has been served due to maritime navigation restrictions related to the Strait of Hormuz during transit between India and Qatar, and as well as possibly due to reported shutdown of liquefaction facility at Ras Laffan. GAIL added that it is currently assessing the situation to determine whether any supply curtailment may be required for its downstream customers, though LNG supplies from other sources and suppliers remain unaffected for now. The company noted that the potential impact of the ongoing force majeure situation cannot be quantified at this stage and is closely monitoring developments and will keep stock exchanges informed of any material updates.
The supply disruption has triggered unprecedented price increases across the industrial gas sector. Adani Total Gas Ltd, the city gas joint venture of Adani Group and France's TotalEnergies, has nearly tripled gas prices for large industrial consumers after disruptions to LNG supplies triggered by the West Asia conflict. As reported by PTI, the company raised industrial gas prices to about ₹119 per standard cubic metre from ₹40, as it tapped costlier alternative supplies following curbs in contracted LNG availability. The company explained that "due to recent geopolitical developments impacting LNG supply routes, ATGL has received upstream gas curtailment, leading to operational constraints." This dramatic price increase reflects the severe stress on the city gas distribution sector, with operators warning that replacing contracted Qatari LNG with spot cargoes priced at more than double could erode the cost advantage of compressed natural gas (CNG) and potentially push consumers toward electric vehicles.
The gas supply disruption has already begun affecting critical industrial sectors, with lower gas supplies having marginally hit production of some fertiliser companies including the Indian Farmers Fertiliser Cooperative Ltd and Kribhco Fertilizers Ltd. According to Reuters, the two companies did not respond to Reuters' request for comment outside normal working hours. Gujarat Gas Ltd, which supplies gas for domestic and industrial clients, has declared a force majeure to restrict gas supplies to industries from Thursday, as reported by Reuters. The company's parent company, GSPC, gets most of the gas from Qatar and Abu Dhabi National Oil Co for sale to local customers. GAIL and IOC have already reduced gas supplies to industries, with GAIL stating that the potential impact from the force majeure could not be quantified. A top oil ministry official said as much as 60 million standard cubic meters per day of gas supplies has been halted due to the blockage of the Strait of Hormuz, with the situation warranting re-prioritising gas supplies by imposing cuts on some users.
Goldman Sachs reports that tanker traffic in the Strait of Hormuz has already shown signs of disruption, with shipping companies, oil producers, and insurers adopting more cautious approaches following incidents involving damaged vessels. The investment bank warns that an estimated $18 per barrel risk premium reflects the potential impact of a complete halt in oil flows through the strait for about a month. A full closure of the Strait of Hormuz could expose up to 16 million barrels of oil per day to disruption, even accounting for some alternative pipeline routes. Additionally, the region handles around 80 million tonnes of LNG exports annually, primarily from Qatar, and any sustained disruption could cause significant tightening in global gas markets. Bloomberg reports that LNG spot prices have soared, doubling week-on-week to about $25 per mmbtu, as importers grapple with evacuation challenges following the blockade of the Strait of Hormuz by Iranian forces. Recent developments have already slowed tanker movements, increased shipping insurance premiums, and freight rates, with some vessels choosing to avoid the region altogether, raising concerns about potential broader supply shortages.
India's heavy reliance on LNG imports has been starkly revealed by this crisis, with the country importing about 195 million metric standard cubic metres per day (mmscmd) of natural gas, of which Qatar supplies around 60 mmscmd. According to PTI, India imports about 88 per cent of its crude oil and around half of its LNG, with 40-50 per cent of crude oil and 50-60 per cent of LNG shipments routed through the corridor. The bulk of India's LNG imports are from Qatar and the UAE, making the country particularly vulnerable to disruptions in this key supply route. Petronet LNG has a long-term contract to buy 8.5 million tonnes per annum of LNG from QatarEnergy's 82 mmtpa Ras Laffan facility, making the company's inability to send ships to Qatar particularly significant for India's energy security. As per Kpler, countries in the Middle East account for roughly 30 per cent of global crude oil and 20 per cent of global LNG production, most of which transits the Strait of Hormuz, making the disruption particularly impactful for Indian energy security. Replacement LNG supplies could potentially come from the United States, West Africa, Australia or Russia, but longer shipping distances would raise freight costs and extend delivery times.