LNG Market Scrambles for New Supply Routes as Mideast Conflict Disrupts Shipments

A conflict disrupting liquefied natural gas (LNG) shipments from the Persian Gulf is forcing energy importers and producers to urgently diversify their supply chains, according to executives and officials at the Gastech conference. The effective closure of the Strait of Hormuz has highlighted the vulnerability of relying on a single region, prompting a global search for alternative gas sources and more resilient supply routes.

Importers Seek Security Beyond the Gulf

Asian nations, heavily reliant on Middle Eastern LNG, are now actively pursuing deals with a wider range of suppliers to secure their energy needs. This strategic shift was a dominant topic among industry leaders last week.

• Thailand's state-owned firm PTT is exploring supply options from Oman, North America, and West Africa, according to Bandhit Thamprajamchit, chief operating officer of its upstream business. Its trading division recently signed a long-term supply agreement with Norway's Equinor.
• Bangladesh, which previously depended on Qatar for most of its LNG, is now looking toward Indonesia, Australia, and China, said power minister Iqbal Hasan Mahmud.

Sue-Ern Tan, head of the International Energy Agency’s regional cooperation centre in Singapore, noted at the conference that governments are now focused on diversifying both suppliers and supply routes. Early in the conflict, state-backed buyers like PetroChina and India's GAIL were forced to purchase costly replacement cargoes on the spot market.

Producers Spread Capital and Risk

In response to the shifting demand, energy producers and trading firms are widening their investment portfolios to develop gas projects far from the current conflict zone. This strategy aims to build more resilient and geographically distributed supply networks.

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Takayuki Ueda, CEO of Japanese energy company Inpex, emphasized a new focus on "portfolio resilience, portfolio diversification, diversification of supply sources, and also security for the entire supply chain." Inpex is advancing its 9.5-million-ton Abadi gas field project in Indonesia, with a final investment decision expected by mid-2027.

This trend is boosting the prospects for new and emerging LNG exporters. Paul Marsden, president of engineering firm Bechtel, said he anticipates new supply coming from projects in East Africa, Saudi Arabia, and the Americas. Nations like Argentina, East Timor, and Tanzania are also gaining attention as potential future suppliers.

Market Impact and Outlook

While the disruption has been significant, new global capacity is helping to mitigate the immediate impact. Tom Summers, an executive vice president at Shell, told conference attendees that while 36 million metric tons of supply from the Middle East has been lost, new global projects mean the net supply deficit this year is only around 5 million tons, or about 1%-1.5% of global supply.

Furthermore, an additional 70 to 80 new LNG vessels entering the market each year provides greater shipping flexibility, Summers added. This allows for more dynamic rerouting of cargoes to meet demand, partially offsetting the logistical challenges created by the Gulf-related disruptions.