Qatar's state-owned energy corporations QatarEnergy declared force majeure on some long-term liquefied natural gas (LNG) supply contracts, including those with Korea. The move comes five days after it hinted it might consider invoking force majeure.
Reuters reported on the 24th (local time) that QatarEnergy declared force majeure on some long-term LNG supply contracts, and that Korea, China, Italy and Belgium were included.
Previously, Saad Al Kaabi, QatarEnergy chief executive officer (CEO) and minister of state for energy affairs, said in an interview with Reuters that "Iran's attack has hit 17% of Qatar's LNG export capacity, and as a result, we may have to declare force majeure for up to five years on long-term contracts bound for Korea, China, Italy and Belgium."
According to QatarEnergy, two of Qatar's 14 LNG production lines (trains) and one of its two gas-to-liquids (GTL) facilities were damaged. CEO Al Kaabi said, "Recovery will take three to five years," adding, "Annual revenue losses will be about $20 billion (about 30 trillion won)."
The move is expected to weigh on Korea, which has a certain level of dependence on Qatari LNG. According to Korea International Trade Association statistics, Korea imported 46.72 million tons of LNG last year, of which 6.97 million tons (14.9%) came from Qatar.
With QatarEnergy's force majeure declaration materializing, tension in the domestic gas and power markets is likely to rise further. If a gap arises in long-term contract volumes, the shortfall may have to be covered in the spot market, and in that case, higher procurement costs could add to the burden on energy prices for households as well as industry, observers said.