Before the Iran war, Qatar was one of the world’s largest exporters of natural gas. Just eight months later, Gulf countries are now buying supplies from their main competitor, the United States.
Qatar Energy signed a deal with a US exporter on Thursday cheniere energy Purchase 4 million tons of liquefied natural gas (LNG) annually until 2054. The purchase price will be indexed to the U.S. Henry Hub price plus a fixed commission. Deliveries are expected to begin in the 2030s.
“We look forward to reliably supplying Qatari energy from both Sabine Pass and Corpus Christi into the second half of this century,” Cheniere CEO Jacques Fusco said in a statement.
Doha’s gas purchases account for less than 1% of the global LNG trade of more than 400 million tonnes. But “in terms of individual deals, this is as big as we’re seeing in the U.S.,” said Alex Manton, director of global gas and LNG at Rapidan Energy in Houston.
The deal shows how the Iran war is reshaping global energy markets in the interests of U.S. companies and strengthening the dominance of U.S. LNG exporters. Cheniere shares and venture globalanother US independent player, has made gains of 26% and 40%, respectively, since the start of the war.
Qatar was defeated
Before the war, Qatar was the second largest exporter of LNG after the United States. But shipments collapsed in the eight months since Iran bombed a major production facility in Ras Laffan. The attack severely damaged two production lines, resulting in the loss of approximately 17% of Qatar’s LNG export capacity.
Qatar’s Energy Minister Saad Sherida Al Kaabi said it would take about three years to repair the damage to Ras Laffan. Persian Gulf states have declared force majeure every month since the March attacks, citing unexpected and uncontrollable events that prevent them from fulfilling their contracts.
“It’s been a huge blow, so to speak, to our production capacity for the next few years,” Alkaabi said in an interview on the sidelines of the United Nations General Assembly in September. He said Qatar currently exports “very little” LNG because “we cannot export through the Strait of Hormuz.”
“A very small number of ships are passing through the strait, but the amount is so small that it cannot be measured in percentage points,” the energy minister said.
freedom of navigation
And it is far from clear what the security situation will be in Hormuz once the repairs at Ras Laffan are complete. Manton said the decades-old contract with Cheniere shows Qatar recognizes the risk that freedom of navigation will never return to Hormuz as Iran continues to attack tankers.
In the case of LNG, finding a way around Hormuz is more difficult because it is essentially a water-based product, analysts said.
“Since it’s liquefied, we can put it on a ship, and for that we need access to maritime routes,” Manton said. “They have to access the Strait of Hormuz. There is no other way to get the LNG to market. They are just stuck.”
Manton said Qatar Energy is expanding its LNG trading operations through the Cheniere contract while production has been severely affected and Hormuz is under blockade.
The company secured a $3 billion loan from a Chinese bank earlier this month, which could help it secure more U.S. LNG to meet international delivery commitments, UBS analyst Manav Gupta said in a note to clients on Thursday.
bullish wall street
Venture Global, for example, is in talks with Qatar Energy for an annual supply of 3 million tonnes, anonymous sources told Reuters.
Mr. Gupta said the deal with Qatar disproves the bears’ claims that Mr. Cheniere will struggle to secure increased sales and, in turn, curb capacity expansion. UBS has a $340 price target on Cheniere, implying an 18% upside from Thursday’s closing price.
Wall Street is largely bullish on both Cheniere and Venture Global. Nearly 90% of equity analysts covering Cheniere rate it a buy, with an average price target of $314, suggesting an upside of about 9% from Thursday’s closing price.
Nearly 60% of analysts recommend Venture Global as a buy, with the remainder rating it a hold. The average price target of $17 represents an upside of about 35% from Thursday’s closing price.
“The U.S. is once again being asked by buyers to diversify its supply,” Manton said. “The United States is now becoming disproportionately large in terms of global (LNG) market share because so much is being built in the United States.”
