Asian LNG Buyers Expect Qatar to Let Force Majeure Lapse in July

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(Bloomberg) — Asian liquefied natural gas customers of Qatar expect the supplier to let its force majeure expire in the middle of next month, as tensions in the region ease and the Persian Gulf producer ramps up exports.

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QatarEnergy hasn’t indicated that it will renew the force majeure clause for customers in Asia, according to people with knowledge of the matter. The company would typically notify customers about a month before extending the declaration, suggesting it intends to let it lapse, said the people, who asked not to be named as they are not allowed to speak to the media.

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A similar force majeure covering European buyers is expected to expire in mid-August and buyers expect it to also lapse, the people said.

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Energy producers across the Gulf are swinging back into action, with the interim peace deal between Iran and US paving the way for flows through the Strait of Hormuz to resume. Invoking force majeure allows a supplier to miss deliveries due to factors beyond its control — such as war or extreme weather — and the potential shift stands to be another signal conditions are normalizing.

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State-owned QatarEnergy had been extending its force majeures every month due to the effective closure of the strait, which choked off about a fifth of global LNG supply. The company operates Ras Laffan, the world’s largest LNG facility, but output has been largely halted since Iranian attacks in March, shortly after the start of the conflict.

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The move by QatarEnergy in March to declare force majeure sent shockwaves through the market, as the gulf producer is known for its reliability, even during periods of turbulence. Ending the order for some buyers would be a signal that the supplier now expects to begin meeting those obligations.

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QatarEnergy didn’t respond to a request for comment.

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It isn’t guaranteed that QatarEnergy will let the measure for Asia expire in mid-July, especially if the situation in the strait were to deteriorate again. Higher exports depend on safe passage through the waterway, with a recent attack on a cargo ship renewing concerns.

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However, QatarEnergy is setting the stage to rapidly increase production and exports as it brings in empty vessels and prepares equipment at Ras Laffan for restart, while shipping out some cargoes through Hormuz. The country plans to return to normal LNG output within weeks from the undamaged parts of its facility, Prime Minister Sheikh Mohammed bin Abdulrahman Al-Thani told the Financial Times this week.

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—With assistance from Alberto Brambilla and Rakteem Katakey.

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