Oil markets dominate the headlines as the conflict in Iran disrupts traffic in the Strait of Hormuz. Yet, for Europe, the more relevant story concerns liquefied natural gas (LNG).
After Russia cut most gas flows to Europe in 2022, the Union shifted towards clean technologies and LNG imports from the United States, Norway, and Qatar. This strategy largely worked: LNG now accounts for almost half of the EU’s gas imports, up from 20% in 2021. Before the war in Iran began, Brussels expected that new LNG supplies arriving by the end of the year and in 2027 would allow the bloc to finally free itself from Russian hydrocarbons.
Damage to the Ras Laffan complex in Qatar, the world’s largest LNG facility, now seriously jeopardizes this strategy. Located on Qatar’s northern coast, Ras Laffan took three decades to build and covers an area about three times that of Paris. The site regularly exports about one-fifth of global LNG supplies. In mid-March, Iranian missiles destroyed two of its 14 liquefaction trains and one of the two gas-to-liquids units, wiping out 17% of the site’s production capacity and 3% of global LNG supply.
There is no quick fix to resume shipments: liquefaction requires cryogenic treatments at -162°C in infrastructure that will take years to rebuild.
The fallout from Ras Laffan will be significant for Europe. QatarEnergy, which operates the plant, invoked force majeure by suspending some deliveries. Combined with disruptions at other Gulf producers, global LNG supply is now about 20% lower year-on-year.
As European, South Korean, and Japanese companies compete to secure limited cargoes, spot prices have reached their highest levels since the 2022-23 energy crisis.
The economic impact will be uneven within the EU, with Italy and Germany among the hardest hit countries. Italian company Edison is among those whose contracts with QatarEnergy have been suspended. Germany does not depend directly on Qatari LNG but is exposed to the price shock, as gas accounts for nearly 30% of its energy mix.
The long-term outlook is even gloomier. Before the war, a new wave of projects—mainly in Qatar and the United States—seemed set to increase global LNG supply by 20% in 2026 and 2027.
The simultaneous arrival of so many projects had operators fearing an oversupply. Now, a surplus scenario appears highly unlikely.
The International Energy Agency predicts that global LNG supplies in the 2026-2030 period will be about 15% lower than pre-war estimates, with most of the deficit concentrated in 2026-2027.
“QatarEnergy estimates that repairs at Ras Laffan will take three to five years, engaging scarce engineering capacity and delaying greenfield projects globally.”
Besides the blow to Qatar, limited engineering capacity and US tariffs represent additional bottlenecks. Only a few companies—Bechtel, Chiyoda Corporation, JGC Holdings, and Technip Energies—combine technical expertise, track record, and financial strength to execute projects that can cost tens of billions of dollars.
QatarEnergy estimates that repairs at Ras Laffan will take three to five years, engaging already scarce engineering resources and delaying new projects worldwide.
Meanwhile, US projects face a self-inflicted obstacle: American tariffs on importing specialized components, such as 9% nickel steel for cryogenic use, are driving up costs for new LNG plants. Overall, these pressures indicate longer timelines and higher costs for LNG supplies on which Europe was counting.
The EU will have to deal with the impact of LNG disruptions for years, with ripple effects in at least three areas.
First, dependence on American LNG will increase: only US companies can fill the gap left by Qatar with the speed Europe needs, and they already supply nearly 60% of European LNG imports.
Optimists might see an opportunity to ease relations with the White House by committing to buy more American LNG, given that these purchases are set to rise anyway.
A more realistic reading is that US President Donald Trump will use Europe’s dependence on American LNG to extract concessions from the bloc.
The second area concerns Russia. With tighter gas markets, calls to lift sanctions on Russian hydrocarbons could become more insistent. Under the RePowerEU plan, Russian LNG imports must be phased out: a ban on short-term contracts came into effect on April 25, and deliveries based on long-term contracts will be banned from January 2027. The conflict in Iran could complicate this path.
Slovakia has long requested to postpone these deadlines, and industrial sector pressures could push Italy and Germany in the same direction. The risk of EU fragmentation is high, as other large member states like France (thanks to nuclear) and Spain (thanks to renewables) are largely shielded from rising gas prices.
The third area concerns European industrial prospects. A 2024 report by former European Central Bank President Mario Draghi identified high energy costs as a crucial challenge for European industry.
Two data points help grasp the scale of the problem: European industrial companies pay four to five times more than American competitors for gas; electricity prices for energy-intensive sectors are on average double those in the United States and 50% higher than in China and India.
The LNG shock is set to further widen the gap, especially for energy-intensive sectors such as chemicals, fertilizers, or steel, leaving European industry in an even more disadvantaged position compared to American and Chinese competitors.
When the Strait of Hormuz reopens, the headlines will move on. The European LNG problem will not.
The strategy developed by Brussels in 2022 to exit dependence on Russian gas is now stuck in the tail of Ras Laffan repairs. This will give Washington and Moscow new leverage over Europe, further worsening already weak industrial prospects.
In the medium to long term, the most obvious option for the bloc will be to intensify demand reduction, expand renewables, and accelerate grid integration. In the short term, however, Europeans have no easy way out of the LNG squeeze.
(Excerpt from Appunti)
