Qatar LNG Disruption Hits Asia: High Prices Trigger Shift to Coal as Gas Demand Braces for Sharp Slump
Qatar’s initial suspension of production at its Ras Laffan LNG plant during the onset of the U.S.-Iran conflict has already sent shockwaves through Asian energy markets. Thursday's latest statement from QatarEnergy—confirming "extensive damage" and fires at several facilities following missile strikes—has significantly escalated the regional crisis.
Given that Ras Laffan typically supplies one-fifth of global LNG, the severity of the damage suggests a recovery timeline of months, if not years, portending a prolonged era of high gas prices.
Asia at the Epicenter
Asia is the primary casualty of this disruption, accounting for 85% of Qatar’s LNG exports. In response, major economies including China, India, South Korea, and Japan, along with Southeast and South Asia, are aggressively tapping into coal reserves accumulated in recent years.
Miaoru Huang, Research Director for Asia-Pacific Gas and LNG at Wood Mackenzie, noted that surging spot prices will force the power sector to lean heavily on coal and likely suppress industrial gas consumption across several markets.
The Specter of "Demand Destruction"
Wood Mackenzie warns that if Qatari supply does not resume shortly, both Northeast and South Asia face a "sharp slump" in gas demand. Alternative suppliers simply cannot fill the massive void left by Qatar.
Northeast Asia: If the outage persists for two months, LNG demand could drop by 4 million to 5 million tonnes by Q3 2026. This reverses earlier forecasts of a 2.2% growth in regional demand for the year.
South Asia (Extreme Vulnerability): According to Laura Page, Manager of Gas and LNG Insights at Kpler, South Asia is the region most exposed to the Strait of Hormuz disruption. Last year, LNG from Qatar and the UAE accounted for:
- 99% of Pakistan's imports
- 72% of Bangladesh's imports
- 53% of India's imports
Page emphasized that for nations like Pakistan and Bangladesh, adjustment will come through demand destruction rather than alternative purchasing, as they are priced out of the spot market.
Regional Exposure and Buffers
The impact varies significantly across the continent based on energy mix and reliance on spot markets:
High Risk: South Korea, Singapore, and Taiwan are highly sensitive to price spikes, as natural gas accounts for at least 25% of their respective power mixes. Ken Lee, LNG Analyst at Vortexa, suggests their exposure to volatile spot prices could increase dramatically.
Relative Resilience: China and Japan appear more insulated, with Qatari LNG representing only 6% and 5% of their total gas supply, respectively.
The Coal Buffer: Deepali Bhargava, Head of APAC Research at ING, highlighted that China and India, as the world's largest coal consumers, possess a "significant alternative buffer" to mitigate the impact of soaring gas costs.
Since the conflict erupted, Asian LNG prices have skyrocketed 70%. While coal prices have also risen by 14%, they remain far more economical than the prohibitive costs of liquefied natural gas.