Qatar Shuts Down LNG Production, Opening the Door for American Energy Leadership

As Iranian missiles rain down on the Gulf, global energy markets are also being hit.

Qatar’s national energy company, QatarEnergy, announced on March 2 that it suspended liquified natural gas (LNG) production “due to military attacks” on its main facilities. QatarEnergy also reportedly declared force majeure, legally allowing the company to skip contracted deliveries without penalty. Energy prices soared, with gasoil futures experiencing their largest single-day increase in four years.

QatarEnergy suspended further operations on March 3, including downstream production of “polymers, methanol, aluminum and other products.” Qatar is the world’s third-largest LNG supplier, so prolonged interruptions to its operations have the potential to constrain global supply. As the world’s leading LNG producer, the United States is uniquely positioned to mitigate a future crisis.

Qatar Is a Critical Node of Global LNG Production

Qatar shares the world’s largest natural gas reservoir with Iran. However, political and economic isolation have squandered Iran’s potential, allowing Qatar to produce, sell, and dominate the LNG market without competition next door. Qatar is responsible for approximately one-fifth of global LNG supply and is planning to boost its export capacity from 77 to 142 million tons per year by 2030.

The European Union purchases upwards of 10 percent of its LNG from Qatar, but Asia remains Qatar’s primary market. More than 80 percent of Qatari LNG is destined for Asian markets, including Japan, India, and South Korea. China leads the pack, absorbing nearly one quarter of Qatar’s LNG exports. Qatar is also a major LNG supplier to Taiwan, accounting for half of the island’s contracted supply.

Threats To Shipping Routes Compound Concerns

Qatar’s LNG exports transit through the Strait of Hormuz, the narrow waterway that connects the Persian Gulf to the Indian Ocean. After the combined U.S.-Israel operation began on February 28, ships in the region reportedly received radio transmissions from Iran’s Islamic Revolutionary Guard Corps (IRGC) warning that “no ship is allowed to pass the Strait of Hormuz.” The IRGC later said that it would permit shipping through the Strait of Hormuz, only to declare the strait closed on March 2.

Iran’s threats have caused maritime insurers to cancel plans or increase their premiums, reducing traffic through the strait regardless of whether Iranian threats materialize. Thus, even if Qatar restarts production, distribution challenges may persist. Saudi Arabia — which shut down operations at its largest oil refinery on March 2 after an Iranian drone strike sparked a fire — is already creating contingencies and will reportedly increase crude oil shipments through the Red Sea via its east-west pipeline.

The U.S. Can Step Up and Step In

Iran’s decision to fire indiscriminately at countries across the Persian Gulf demonstrates the need for LNG supplies not prone to disruption. Importing nations — many of them American allies — need more options when it comes to supply.

That is where the United States can step in. First, the U.S. should move quickly to provide American LNG in place of Qatari energy, upping production if necessary. American energy firm Venture Global boasts the largest number of uncontracted LNG cargoes in the world and has already offered “to help stabilize the global markets,” according to Reuters.

The U.S. should also coordinate with other LNG producers to assure the market that adequate and available supply exists. Concurrently, the Trump administration should reassure American allies of its commitment to the defense of their energy infrastructure while prioritizing strikes on targets that degrade Iran’s ability to threaten global energy flows.

Natalie Ecanow is a senior research analyst at the Foundation for Defense of Democracies (FDD). For more analysis from Natalie and FDD, please subscribe HERE. Follow Natalie on X @NatalieEcanow. Follow FDD on X @FDD. FDD is a Washington, DC-based, nonpartisan research institute focusing on foreign policy and national security.