Key facts
- LNG importers are seeking lower prices and more flexible terms in future contracts with Qatar and the UAE.
- The Middle East conflict has reduced the reliability of these LNG exporters.
- Shipping through the Strait of Hormuz has become more challenging, impacting cargo movement.
- Some LNG expansion projects have faced delays or disruptions.
- Buyers are negotiating lower Brent-linked prices due to increased regional risk.
The ongoing conflict in the Middle East has significantly altered the negotiating landscape for Liquefied Natural Gas (LNG) exporters Qatar and the United Arab Emirates (UAE), diminishing the leverage they have historically held. Importers across Europe and Asia are now planning to push for more favorable terms, including lower prices and increased contract flexibility, in their upcoming long-term deals.
For years, Qatar and the UAE were seen as highly reliable LNG suppliers, granting them substantial negotiating power. However, the current conflict has disrupted this perception, with cargoes facing difficulties moving through the Strait of Hormuz and some LNG capacity expansion plans being stalled or delayed due to direct threats. The region is no longer viewed with the same level of certainty as a supplier.
Even China, the world's largest LNG importer, is reportedly exploring long-term supply agreements with exporters that do not rely on the Strait of Hormuz, aiming to reduce its exposure to deliveries from the Persian Gulf. European LNG buyers feel empowered to seek better deals, particularly given the surge in insurance and freight costs associated with shipping gas from this war-risk area.
Nicola Monti, CEO of Italy's utility and LNG buyer Edison, noted that new contracts in the Gulf region will need to account for potentially higher insurance costs. Edison itself was impacted by a force majeure declaration from QatarEnergy early in the conflict. The increased regional risk has emboldened buyers to secure deals at lower Brent-linked prices, with some post-February contracts seeing a reduction in the price linkage compared to pre-war agreements.