Shell Reports 36 Million Tons of LNG Supply Loss in the Middle East
A Shell executive stated that as of now, the global market has lost approximately 36 million tons of liquefied natural gas (LNG) supply due to the situation in the Middle East.
This shortfall primarily originates from Qatar—prior to the outbreak of conflict, Qatar accounted for about 20% of global LNG supply. However, since the escalation of conflict between Iran and the U.S. and Israel at the end of February, Qatar's exports through the Strait of Hormuz have been largely interrupted. Qatar's energy sector previously announced that about 17% of its production capacity would require years to repair; Shell's CFO had previously revealed that the damaged Pearl GTL facility in Ras Laffan Industrial City is not expected to resume operations until the first quarter of 2027.
The ongoing closure of the Strait of Hormuz since March has resulted in approximately one-fifth of global LNG exports being cut off in recent months. In its latest "LNG Outlook 2026," Shell predicts that if the Strait of Hormuz reopens within the year, global LNG trade volume in 2026 could be roughly on par with 2025 (approximately 422 million tons). However, if the blockade continues, there could be a rare year-on-year contraction in supply, and relevant facilities will require about 6 to 8 weeks to fully restore output after the strait reopens.
Asian buyers have paid a high price to fill the gap—statistics show that since the outbreak of conflict, India, Pakistan, Bangladesh, Thailand, and Vietnam have collectively spent about $7.4 billion on spot LNG purchases, while the same quantity of goods would have only cost about $3.1 billion based on pre-conflict long-term prices. Bangladesh alone has spent over $2 billion to compensate for the shortfall in Qatari supply, with Asian spot LNG prices once exceeding $20 per million British thermal units during the peak of the conflict.
Faced with supply uncertainty, about 80% of LNG buyers have indicated plans to diversify their procurement sources to more regions, with some countries beginning to accelerate the shift to alternative energy sources such as solar, wind, coal, nuclear, and domestically produced natural gas. Analysts warn that this is the second round of geopolitical conflict impacting the region in months, stating, "One geopolitical conflict is bad, but a second becomes a pattern."
The supply gap has forced global LNG traders and buyers to seek alternative sources from non-Middle Eastern regions such as the U.S. and Australia, driving up spot premiums and freight costs. Benefiting from this are suppliers in the U.S. and Australia with idle capacity that can quickly fill the gap, while emerging market buyers in South Asia and Southeast Asia, who have long relied on Qatari long-term supplies and lack bargaining power, are under pressure. Shell, leveraging its extensive global trading network and diversified asset portfolio, recorded its highest quarterly profit of $9.8 billion since the onset of the Russia-Ukraine conflict in the second quarter, demonstrating that leading traders can profit from price differentials amid supply tightness.
Source: Public Information
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Qatar has long been the most important "swing supplier" in the global LNG market. The recent missile strikes on the Ras Laffan Industrial City facilities amid the U.S. and Israel's conflict with Iran have forced a complete shutdown and declared force majeure. Shell CEO Wael Sawan characterized this as a "short-term event rather than a structural issue," indicating that management still likens it to the historical script of the initial phase of the Russia-Ukraine conflict, which involved short-term shocks and mid-term market reallocation of supply to absorb the impact.
A clear financial redistribution is occurring—funds that were originally directed towards long-term procurement from Qatar are now shifting to emergency high-priced spot market purchases. The combined additional expenditure of just India, Pakistan, Bangladesh, Thailand, and Vietnam amounts to about $4.3 billion. Meanwhile, Shell, with its diversified global trading and refining assets, has recorded high profits in a tight supply environment, indicating that capital in crisis is flowing from "buyers reliant on a single production region" to "leading traders with global allocation capabilities."
This situation is highly similar to the early phase of the Russia-Ukraine conflict in 2022, when Europe was forced to scramble for global spot LNG, driving up global gas prices. The commonality is that geopolitical conflicts in a specific region lead to a sudden contraction of key supply nodes (previously Russian pipeline gas, now Qatar and the Strait of Hormuz), forcing global buyers to compete for limited spot shipping capacity. The difference this time is that the most affected are emerging market buyers in South Asia and Southeast Asia, who are more price-sensitive, rather than the developed economies in Europe that were most impacted in 2022. This is why analysts state, "One conflict is an accident, the second becomes the new normal."
Essentially, this is a restructuring of the supply chain triggered by geopolitical conflict—global LNG buyers are being forced to shift from "relying on a single low-cost long-term supply" to a procurement structure that coexists with "diversified spot and long-term contracts." Mechanistically, as long as the geopolitical risks in the Strait of Hormuz persist, the market will continue to pay an additional premium for "supply certainty," which will ultimately be borne by emerging market buyers lacking alternative options, while leading traders and suppliers in the U.S. and Australia with idle capacity will benefit from this restructuring.
ABAB News · Cognitive Law
Once the chokepoint is cut off, the premium is immediately passed on to the party with the weakest bargaining power.
One conflict is an accident, the second is the new normal.
The ones who make the most money in a crisis are always those who can allocate globally.