Energy This Week | The National

The last few days have been the most disruptive to the energy markets since the 1990 Gulf War. Oil and gas suffered a substantial supply outage after Iran attacked key production facilities in Saudi Arabia and Qatar with missiles and drones this week. Saudi Arabia is the world’s largest exporter of oil, accounting for 9 per cent of total supply. Qatar accounts for 20 per cent of trade in liquefied natural gas (LNG). Saudi Arabia’s Ras Tanura refining complex, which produces 550,000 barrels-per-day, was hit and, as I write, has been attacked again. Qatar’s Ras Laffan LNG complex, which is the largest in the world, was closed after it was attacked on Monday. And today, the operator QatarEnergy declared force majeure, which means it will not be able to meet its contractual supply agreements. As the Strait of Hormuz is the only passageway for Qatari gas to reach its buyers, its supply to the world has completely come to a halt. Saudi and Abu Dhabi crudes can be supplied via the Red Sea and Fujairah terminals, respectively. But Iran has also begun targeting the UAE’s Fujairah and Oman’s Duqm, an Indian Ocean-facing port, effectively deterring Gulf states from using alternatives to Hormuz. Brent, the benchmark for two-thirds of the world’s seaborne crude, jumped 11 per cent on opening trading and has remained above $80 per barrel due to ongoing supply risks.

With insurers shunning Hormuz as too risky and others cancelling war risk premiums following attacks on at least four tankers over the past four days, traffic along the strait, which carries a fifth of the world’s seaborne oil, has come to a standstill.

Iraq, which also relies on the waterway to sell its crude, has halted exports and production at its largest field as it is running out of storage for the oil it has been pumping.

In this week's newsletter, I take a look at what’s next for the Gulf, the gas markets and Iraq.

The halt of LNG production in Qatar and subsequent declaration of force majeure by QatarEnergy have exposed how concentrated and fragile the global gas supply remains. The Gulf state accounts for roughly 20 per cent of the world’s LNG exports, with 77 million tonnes per year of capacity concentrated at Ras Laffan Industrial City. Following Iranian strikes on key facilities, Doha suspended output across its 14 liquefaction trains, sending benchmark gas prices up as much as 45 per cent in immediate trading.

Qatar’s exports are critical to Asia in particular, where it is the single largest supplier to India and a major provider to China, Japan and South Korea. Every cargo must transit the Strait of Hormuz, underscoring the geopolitical risk embedded in global LNG flows. With Europe still short of Russian pipeline gas - following Moscow’s invasion of Ukraine - and reliant on seaborne LNG, prolonged disruption tightens an already competitive market. It also adds to heightened energy security concerns in the Gulf and beyond.

Bottom line: Even a short outage will keep LNG spot prices elevated and volatile. India, whose top LNG supplier is Qatar, is already cutting back on gas allocations to industry.

A prolonged shutdown would likely trigger sustained price spikes in Asia, spike European benchmarks, and intensify bidding wars for cargoes.

Iraq halted output at its largest oil field, Rumaila, which had been producing about 1.5 million bpd (36% of overall output) and suspended exports through the Ceyhan pipeline. Iran’s regional strikes have deterred tanker traffic at the main loading terminals at Basrah. Storage tanks have reached critical levels, forcing production cuts that now risk expanding beyond Rumaila if the export blockage persists. Key fields in Kurdistan have already stopped production. Crude sales make up over 90% of Iraq’s state revenues and fund a bloated public sector payroll. Without alternative export routes, Baghdad has limited options to generate the cash needed to pay workers and sustain the public sector.

Bottom line: A prolonged loss of oil revenue threatens Iraq’s wage bill and public sector salaries, risks renewed protests and social unrest, and strains an already fragile political consensus.

A worker operates valves at Rumaila oil field. Reuters

About 65% of crude and petroleum volumes transiting the Strait of Hormuz in Q1 2025 originated from GCC states.
Breakdown: Saudi Arabia 37%, UAE 13%, Kuwait 10%, followed by Iraq and Iran.
For LNG, Qatar accounts for a dominant 93% of volumes moving through the Strait; the UAE makes up the remaining 7%.
More than 80% of Saudi crude exports pass through Hormuz, versus roughly 65–68% for the UAE.
Both countries have bypass routes: Saudi Arabia via the East-West Pipeline to Yanbu and the UAE via Fujairah.
Crude oil spare capacity is limited to about 2.6 million bpd.[Source: S&P Global]

Ras Tanura (Saudi Arabia): Operations at the 550,000 bpd refinery were halted after a reported drone strike. The site also hosts the kingdom’s largest offshore crude loading terminal, vital for the world’s top oil exporter to meet supply commitments. Iran denied targeting the refinery, which was hit again on Wednesday.

Mina Al Ahmadi (Kuwait): The 346,000 bpd refinery was affected after debris reportedly fell on parts of the plant. Iran also targeted Kuwait’s US embassy amid wider strikes.

Duqm Port (Oman): The southern port, outside the Strait of Hormuz, was hit by drones. It lies near a newly built 255,000 bpd refinery, underscoring risks to alternative routes.

Jebel Ali (UAE): The port, next to a condensate refinery and power facilities, was struck. One berth caught fire after debris from an intercepted Iranian missile landed there.

Ras Laffan (Qatar): The LNG hub halted operations after coming under attack. QatarEnergy operates 14 LNG trains with 77 million tonnes per year capacity, supplying 20% of global LNG.

Fujairah (UAE): The major bunkering and refined products storage hub was hit twice. Drone strikes targeted a tank farm. Adnoc ships crude via the 1.5 million bpd Habshan pipeline to bypass Hormuz.

Kharg Island (Iran): Iran’s main crude export terminal was struck by US-Israeli forces. The country exported about 2 million bpd before the escalation.

The share of the Middle East in overall global crude production, according to the Energy Institute.

Liquefied Natural Gas is natural gas cooled to -162°C, so it shrinks 600 times in volume. That makes it easy to store on ships and send across oceans.