Extensive damage at Qatar’s Ras Laffan gas site after Iran attack
The Ras Laffan attack came after Iran’s biggest gas field, South Pars, was attacked by Israel, sending oil prices surging during trading hours on Wednesday.
There is ‘extensive damage’ at the Qatari Ras Laffan gas site as a result of missile attacks, QatarEnergy reported late on Wednesday. Qatar has blamed the attacks on Iran and described it as a “dangerous escalation”.
The Ras Laffan attack has raised fears overnight about further escalations in the Middle East conflict.
Iran produces some 24 billion cubic feet per day of raw gas and 1 million b/d of associated liquids from South Pars, a field which is the southern cousin of the North Pars field, which is located in Qatari waters. Most of the gas flows to the domestic Iranian market.
Soon after the attack on energy infrastructure, Iran threatened to attack energy facilities in the Gulf in return, publishing a list of potential targets. The country has already been launching attacks across the region at countries where U.S. bases are located, such as in the United Arab Emirates and Saudi Arabia.
“Any damage to Gulf countries’ energy infrastructure will further escalate the situation and put more pressure on the energy market,” Ali Nabizadeh, Upstream Research Analyst at Wood Mackenzie said. “If damage is sustained to Qatar’s LNG trains, this could ensure global gas prices stay high even if the war ends.”
Oil prices surged to over $108 per barrel as investors worried about worsening impacts on supply. The strait of Hormuz has been closed since March 2nd. The waterway is the main transit pathway through which around 20% of the world’s oil and LNG supply travels through.
The scale of the attack in Iran is still unknown but damage is thought to have affected the onshore Assaluyeh hub (limited to Phases 3-6), and also some adjacent petrochemical plants, Wood Mackenzie said.
“Seasonality and domestic demand reduction due to the war can help Iran deal with a potential short-term crisis, but if this situation persists, domestic demand will be prioritised over export commitments, as has happened before,” Nabizadeh said.
Qatar reported that the Ras Laffan fire was under control.
Investor fears
There has been a significant change in the past week in terms of the market’s reaction to the crisis in the Middle East, as investors have moved from analysing fears to actual physical supply disruptions.
“Attacks on energy infrastructure are raising concerns not only about the Strait itself but about the resilience of production and export facilities across the region” Justin Dargin, Senior Fellow at the Middle East Council on Global Affairs, told Gas Outlook.
“In other words, the risk is no longer confined to a single maritime chokepoint but increasingly extends to the physical energy infrastructure that supports global supply,” he added.
How prices continue to react depends on whether the conflict continues to draw in additional actors, Dargin noted, which could lead to the Strait being blocked for a significant amount of time. Some Gulf countries, such as Qatar and Kuwait have no way to bypass the Strait and will be forced to shut in production if it remains blocked, which would take a significant amount of supply out of the market.
Other countries, like the UAE and Saudi Arabia, also only have limited abilities to bypass the Strait or store barrels before they would be forced to shut in production.
On Iranian turf, the internal infrastructure is being heavily targeted by Israel and the American military industrial complex, with Iran’s military intelligence officer Ali Larijani killed on March 17th and another key intelligence official, Esmail Khatib, killed in an air strike on March 18th.
There are looming questions about whether Iran is likely to become a failed state with the loss of key leadership figures, infrastructure damage, mounting economic constraints, and civil unrest.
On the other hand, the regime has so far shown itself to be capable of intense retaliation against attacks and to be able to operate effectively on a military level even following the killings of political figures by Israel. These are also the same figures that would, under other circumstances, be involved in diplomacy talks with U.S. President Donald Trump.
Additionally, because of the way Iran has advised and structured its military in the event of conflict, many key decisions have been devolved to local commanders within Iran, rather than through a centralised decision-making structure. This means that in the absence of central leadership figures, the conflict could paradoxically drag on longer since responses are now more atomised, Dargin told Gas Outlook.
“Under a severe escalation scenario, particularly if the Strait of Hormuz were disrupted for an extended period, oil prices approaching $200 per barrel move from speculation into the outer bounds of possibility, and under a prolonged disruption, potentially into probability.”
For establishing longer-term energy security, countries may look towards accelerating cleaner climate solutions away from oil and gas, such as the development of homegrown renewable energy sources.
On the other hand, one U.S. LNG project has already announced advancements in development since the beginning of the Israel-US-Iran conflict, citing its strategic importance for global energy supply.
One of the world’s biggest suppliers of global LNG, Qatar, has declared force majeure on its facilities.
(Writing by Miriam Malek; editing by Sophie Davies)