QatarEnergy temporarily alters LNG shipping routes as Red Sea attacks continues

Sources with direct knowledge of the matter revealed that at least four tankers carrying Qatari LNG were affected over the weekend, held up as a response to recent attacks by U.S. and British forces on Houthi targets in Yemen.

QatarEnergy, the world’s second-largest exporter of liquefied natural gas (LNG), has decided to halt its LNG shipments through the Red Sea due to security concerns arising from attacks by Yemen’s Iran-backed Houthi group. While production continues, the decision aims to ensure the safety of its tankers navigating through the Red Sea, a vital route representing about 12% of global shipping traffic.

Sources with direct knowledge of the matter revealed that at least four tankers carrying Qatari LNG were affected over the weekend, held up as a response to recent attacks by U.S. and British forces on Houthi targets in Yemen. The vessels, including Al Ghariya, Al Huwaila, Al Nuaman, and Al Rekayyat, either loaded LNG at Ras Laffan in Qatar or were on their way back, but all stopped their journeys in the region.

The decision to pause Red Sea shipments is a precautionary measure to seek security advice. If deemed unsafe to continue through the Red Sea, QatarEnergy is prepared to reroute its shipments via the Cape of Good Hope, adding approximately 9 days to the journey. Although this alternative route might incur additional costs of around 1-1.30 euros per megawatt-hour (MWh), it would be partially offset by avoiding Suez Canal fees.

The move impacts various stakeholders, including shipowners and managers of the vessels involved, such as Teekay Shipping Glasgow, Pronav Ship Management, Nakilat Shipping Qatar Ltd, and Shell’s shipping and chartering arm STASCO. Despite requests for comments, they have not yet responded.

Qatar shipped over 75 million metric tons of LNG in 2023, with significant quantities reaching buyers in Europe and Asia. The disruption in shipping routes could result in delivery delays, but industry experts suggest it won’t be dramatic for European energy balances.

While some LNG vessels have altered their courses, others continue to sail past Yemen through the Red Sea and Suez Canal. Qatar, the United States, and Russia are the most active shippers of LNG through this route. According to S&P estimates, Qatari LNG cargoes through the Suez Canal amount to 14.8 million metric tons annually.

As a consequence of these developments, front-month European benchmark gas prices on the Dutch TTF hub experienced a decline of 1.20 euros, standing at 30.40 euros per MWh. Additionally, Asia spot LNG prices reached a seven-month low of $10.10 per million British thermal units (mmBtu) on Friday, attributed to robust storage levels in Europe and northeast Asia.

Global oil prices have also been impacted, edging lower after a 1% rise on Friday, fueled by concerns that the ongoing conflict could disrupt oil supplies. The situation remains fluid as QatarEnergy assesses the security landscape and considers alternative shipping routes to safeguard its vital role in the global LNG market.