LNG

If tensions between Iran and Israel escalate into a regional war scenario, it could severely impact regional oil and gas exports as well as global shipping routes. Attacks on key facilities could wipe out nearly 1.4 million bpd of Iranian production and a full-blown war would choke the Strait of Hormuz, risking up to 12 million bpd of oil, analysts warn.

Upstream activity in Iran, so far, has stayed steadfast despite fighting following Hamas’ assault on Israel in October 2023. Iran's production rose by 227,000 bpd to 3.27 million bpd in August year-on-year, while Israel’s gas output grew 15% in 2023 and is expected to rise by 5% this year, supported by the Karish field.

Some $2 billion in greenfield investment had been planned for various upstream projects in the coming years. But production at the Karish and Katlan fields could be severely reduced if regional tensions escalate, hence future production and exports are at risk.

Anticipating the future is challenging, Rystad’s Middle East research director, Aditya Saraswat noted. So far – with no direct attacks between Iran and Israel, the conflict is largely a ‘proxy war’. As of today, there have not occurred major assaults on critical oil and gas infrastructure such as pipelines, storage facilities, or refineries.

All eyes on maritime borders

If things get worse, the maritime border agreement between Israel and Lebanon, signed in October 2022, could be torn to pieces. The agreement defines each country's rights over the Karish and Qana fields, with Israel retaining full rights to Karish and Lebanon to Qana.

“Escalating tensions could lead to the nullification of this agreement, affecting Israel's production from the Karish field, which is currently used for domestic supply,” Saraswat reckons, suggesting: “This disruption may also impact Israel's gas exports to Egypt and Jordan, which saw significant growth in 2023.

“Any decline in production and exports from Karish could be offset by increased output from other major fields like Tamar and Leviathan,” he noted.

The fields hold about 88 billion cubic meters (Bcm) of cumulative proven and probable (2P) reserves. Together, they form the independent’s core area of operation – following the divestment of its Croatian, Italian, and Egyptian assets. Production from the Katlan fields (Athena and Zeus) is expected to start by 2027.

All these fields are located near the Karish field near Lebanon’s maritime border, so analyst warn that any significant unrest could delay start-up.

Abu Dhabi National Oil Co. (ADNOC), the main oil and gas company of the United Arab Emirates, has as expected made a final investment decision to build a second LNG export plant sited in the industrial city of Ruwais and has also awarded engineering contracts.

President Yoon Suk Yeol of South Korea, one of Asia’s main LNG and crude oil importers, has announced that surveys have shown that the nation had potentially very large offshore oil and natural gas reserves of its own and that an exploration and production campaign would begin later in 2024.

ADNOC Gas, the energy company in Abu Dhabi in the United Arab Emirates, plans to invest $13 billion in domestic and international opportunities in the next five years and aims to more than double its LNG production capacity by 2028.

Israel has suspended production at the Tamar natural gas field supplying Israel, Jordan and Egypt offshore the East Mediterranean coast and not far from the Gaza strip after the terrorist attacks against Israeli civilians over the weekend that have spread regional instability and affected natural gas prices more than crude oil prices.

Japanese liquefied natural gas imports dropped by 12 percent in March even as cargo numbers remained stable from Australia and Asian nations and with thermal coal shipments falling by more than delivered LNG volumes amid ample stocks and lower demand for power generation.

Qatar Gas Transport Company, known as Nakilat and with a liquefied natural gas LNG fleet of 69 vessels, has posted a 3.6 percent increase in first-quarter 2023 net profits.

ExxonMobil Corp., the leading global oil and gas company and LNG market operator, indicated that first-quarter earnings could fall by up to 25 percent from the previous quarter because of falling prices and other factors.

Baker Hughes, the US liquefied natural gas equipment-maker and energy services company, was awarded a major LNG order from QatarEnergy for the North Field South expansion project.

POSCO International, the energy subsidiary of South Korean steel company POSCO, has held a ground-breaking ceremony for a planned new LNG terminal near the site of the existing Gwangyang facility in South Jeolla province.