Attack On Qatar's LNG Facility Raises Risk Of Wider Supply Disruptions In Asia

KUALA LUMPUR, March 20 (Bernama) — Asia-Pacific economies now face rising risks of physical shortages, not only of energy, following the latest Iranian attack on Qatar’s Ras Laffan LNG facilities, including oil and gas but also of fertilisers and, by extension, potentially food later in the year.

In a report, BMI said the impact stands to be far larger than the minor growth and inflation revisions that we recently made to account for higher oil prices.

It is to be noted that Ras Laffan is the world’s largest liquified natural gas (LNG) export terminal, responsible for around 20 per cent of global supply. QatarEnergy had already declared force majeure following the initial drone strikes on March 2, said BMI, a unit of Fitch Solutions.

In 2025, Qatar exported 81 million tonnes of LNG, around 90 per cent of which went to Asian markets.

Indeed, the disruption so far has removed approximately 5.8 million tonnes of LNG supply in March alone, according to Kpler, a global data and analytics company specialising in tracking and analysing commodity markets and trade flows,especially energy like oil and LNG.

Kpler also assesses that the realistic supplementary supply from all alternative sources totals under 2 million tonnes, leaving at least a 3.8 million tonnes shortfall.

On balance, however, global supplies will be supplemented by additional capacity coming on stream from the US to offset the losses from Qatar, thus leading into a period of structural LNG oversupply irrespective of near-term losses in Qatar, said BMI in a statement today.

It said exposure within APAC is highly differentiated with Singapore, Thailand, Taiwan, China, Japan and South Korea heavily reliant on gas to generate electricity. With the exception of Japan, they also source a large portion of their LNG imports from Qatar.

“That gas plants in those economies can also generate using diesel mitigates the risk, as do the strategic fuel reserves retained by them. Meanwhile, exporters like Australia, Indonesia, Malaysia and Brunei are even less exposed.”

Less developed economies like Pakistan and Bangladesh will face the most severe impact.

“They are already absorbing the shock through demand destruction rather than spot market replacement. For Bangladesh, which has shuttered four of its five fertiliser factories as a direct downstream consequence, the cascading effects are only beginning.”

As for oil, more than one-quarter of global seaborne oil trade transit the Strait of Hormuz and APAC economies sit at the end of that pipeline.

“Mainland China and India absorb the bulk of Iraqi crude in heavy grades processed by refineries purpose-built for that feedstock -- substitution is not simply a matter of sourcing elsewhere.”

”And even if supply shortages do not result from extended Hormuz closure, economies with precarious forex reserve positions such as Vietnam, Pakistan and Sri Lanka, risk having to reduce fuel imports if prices stay elevated for longer.”

Besides these, the Gulf Cooperation Council (GCC) is also a key supplier of nitrogen fertiliser, a consequence of the fact that gas is a key input for manufacturing nitrogen fertilisers.

Qatar Fertiliser Company alone supplies 14 per cent of global urea, and as much as a third of global nitrogen fertiliser trade could be disrupted by a sustained disruption to gas supplies.

“APAC's exposure is acute. Asian countries receive 35 per cent of GCC urea exports, 53 per cent  of sulphur exports, and 64 per cent of ammonia exports. India has already cut output at three domestic urea plants as Qatari LNG feedstock dried up; Bangladesh, as noted, has shuttered four of five fertiliser factories.’

Urea prices have risen roughly 25 per cent since the war began, with further upside if the conflict persists.

“The timing is bad,” said BMI, nothing that the disruption falls close to key sowing seasons across the region. Mainland China, India, Thailand, the Philippines, Vietnam, Pakistan and Sri Lanka plant rice and corn primarily in April and May.

The disruption coincides with key planting and fertiliser application periods across the region, potentially affecting yields if shortages persist through the growing season.

However, major importers like India and China maintain strategic nitrogen fertiliser stockpiles and prioritise food security, which should mitigate the most severe scenarios, with our view that both countries have the stockpiles to stave off a potential sharp retreat in application rates for the upcoming harvests.

However, India's October sowing season is where it will come into focus.

That higher nitrogen fertiliser prices will feed through to higher food prices later this year is likely, though adaptive responses from governments and farmers will moderate the impact,” it said.

— BERNAMA