Shares of US liquefied natural gas producer Cheniere Energy jumped to an all-time high while Venture Global initially spiked as much as 13 per cent on Thursday after QatarEnergy said attacks by Iran may shut nearly a fifth of its LNG output for up to five years.
Cheniere hit a record high in intraday trade and its shares were up about seven per cent to $285 in afternoon trading, while Venture Global reversed most of the gains earlier in the day. Venture Global shares are up about 50 per cent over the past month.
The Thursday rally followed comments from QatarEnergy CEO Saad al-Kaabi, who told Reuters that Iranian strikes had knocked out 17 per cent of the gulf nation’s LNG export capacity. Al-Kaabi said two of Qatar’s 14 LNG trains and one of its two gas-to-liquids plants were damaged. Repairs will sideline 12.8 million tonnes per year of LNG for three to five years, he said.
Qatar is the world’s largest LNG exporter, followed by the US. Cheniere can export more than 51 million tonnes of LNG per year, while Venture Global can ship out more than 37 million tonnes, according to the companies’ recent earnings calls.
Cheniere sells 94 per cent of its output under long-term contract, while Venture Global keeps about 30 per cent for the spot market.
Since the US and Israel started bombing Iran on February 28, US gas prices have jumped about 12 per cent compared to gains of 91 per cent in Europe and 88 per cent in Asia.
Gas is trading at 37-month highs near $21 per million British thermal units (mmBtu) at the Dutch Title Transfer Facility (TTF) benchmark in Europe and near $20 at the Japan-Korea Marker (JKM) benchmark in Asia.
Before the latest strikes, consultancy Wood Mackenzie had estimated Qatari LNG output could return to full capacity within four to six weeks following a brief outage. That timeline will now be extended depending on the severity of the damage, it said in a note on Thursday.
"The damage to the two LNG trains at Ras Laffan will inevitably mean that suppliers elsewhere around the world will have more business for the coming few years. But the higher European and Asian gas prices we have seen in recent weeks are now likely to remain elevated for longer, which undoubtedly will result in fuel-switching in both the power and industrial sectors," said Wood Mackenzie Europe Gas LNG director Tom Marzec-Manser.
Ira Joseph, a fellow at Columbia University’s Center on Global Energy Policy, said that some of the lost Qatari supply could be offset by new US capacity expected to come online from Golden Pass LNG owned by Exxon Mobil and QatarEnergy in Texas, in addition to three other plants under construction by Sempra, NextDecade and Venture Global. Joseph said the key question moving forward is whether Qatar’s massive North Field expansion will also be affected.
“If it is impacted, then structurally we have to adjust our LNG prices higher,” he said. “But if we do that, we also have to weaken our demand growth outlook.” Analysts at Jefferies warned that prolonged outages could lead to sustained higher prices, although there will be some demand destruction and coal-for-gas switching. Buyers, however, are increasingly prioritizing supply diversity and geopolitical resilience over the lowest-cost LNG, they added.
(Reporting by Curtis Williams in Houston; Editing by Nathan Crooks and Nick Zieminski)