QatarEnergy Continues LNG Buying Spree to Hedge Future Hormuz Disruptions

QatarEnergy is buying long-term supplies of liquefied natural gas from US producers. The goal is to create a revenue hedge against future interruptions in the Strait of Hormuz. Qatar currently sends all its LNG exports through the strait, so a closure could prevent shipments and sharply reduce income.

The company signed a 20-year deal with Woodside for 3 million metric tons per year. It also signed agreements with Cheniere Energy for up to 4 million metric tons annually through 2054. QatarEnergy can use its trading business and tanker fleet to move these US volumes toward markets that need gas.

If Hormuz becomes unusable, gas prices would likely rise, especially in Europe. QatarEnergy could sell US-sourced cargoes at those higher prices and earn revenue during the disruption. The company says it expects more agreements and is targeting substantially more than 7 million metric tons annually.

Liquefied natural gas, or LNG, is natural gas cooled to an extremely low temperature until it becomes a liquid. The liquid form takes up far less space than gaseous natural gas. This makes it practical to load large quantities into specially designed ships and transport them across oceans.

The article does not explain how LNG is made or shipped, but it describes QatarEnergy’s LNG tanker fleet and US export facilities. Gas is cooled and loaded at an export terminal, carried in insulated tanks, and warmed back into gas at its destination. That process connects producers and buyers separated by seas.

This flexibility matters to QatarEnergy because its own LNG exports pass through Hormuz. US LNG can instead be sourced from American terminals and directed toward Europe or other markets. QatarEnergy says its trading operation and fleet of about 200 LNG tankers give it the ability to capture price differences during disruptions.

QatarEnergy’s latest agreements cover 7 million metric tons per year. The total combines 3 million metric tons annually from Woodside’s US facilities and up to 4 million metric tons from Cheniere Energy. The Woodside contract lasts 20 years, while the Cheniere supplies run through 2054.

These are large commitments, but Qatar’s own LNG role is larger still. The article says Qatar accounts for around a fifth of global LNG exports. Every one of those Qatari export volumes passes through the Strait of Hormuz, making the country unusually exposed to a closure or other disruption there.

The deals are only a starting point. QatarEnergy’s chief executive said the company’s target is much higher than 7 million metric tons per year. More 20- to 25-year agreements with US and other producers are expected, although Cheniere deliveries are not due to begin until 2031.

If the Strait of Hormuz becomes unusable, QatarEnergy could lose access to the route used by all of Qatar’s LNG exports. The company has already said that being unable to ship volumes caused a heavy revenue toll. A prolonged closure would therefore threaten one of the world’s largest LNG exporters.

At the same time, a disruption would remove major gas supplies from the market. QatarEnergy’s CEO said gas prices would immediately spike in a closure scenario. The company could then use its US supply contracts, trading operation, and tanker fleet to move gas toward markets where prices are higher.

That revenue would not fully erase the damage automatically. QatarEnergy’s plan is designed to generate income that otherwise would not exist during a crisis. Its US deliveries also start later: Cheniere cargoes are not expected before 2031. The scale and duration of any closure would determine the result.

QatarEnergy’s strategy uses geographic price differences, known as arbitrage. US gas can be cheaper than gas in Europe. By securing long-term US LNG and selling cargoes into a higher-priced European market, the company aims to keep earning money even when its Qatari exports are blocked.

The mechanism depends on several assets working together. US facilities provide the LNG, QatarEnergy Trading identifies the best destination, and the company’s tanker fleet transports the cargoes. If European prices rise during a Hormuz disruption, selling there can produce a margin after purchase, shipping, and other costs.

The chief executive said this arbitrage could make up some of the loss from Qatar’s disrupted exports. In normal conditions, the company would make a reasonable return. In critical conditions, a price spike could make the alternative cargoes considerably more valuable. The strategy requires no new capital spending, according to Kaabi.

QatarEnergy studied pipeline options before choosing a trading strategy. The company rejected them because pipelines and their pump or compression stations could also be targeted during a conflict. Building new pipelines or LNG trains would additionally require major capital spending, while buying and trading existing supplies is cheaper.

Its customer contracts create a second limitation. QatarEnergy’s long-term agreements are point-to-point. They require cargoes to move from specified export terminals to specified destinations. That means US LNG bought for QatarEnergy’s trading strategy cannot simply be offered as a backup to existing customers when Qatari cargoes are disrupted.

Instead, QatarEnergy must manage the US volumes through its trading operation and shipping fleet. The approach gives it flexibility to seek the best commercial destination, rather than changing the terms of old contracts. The company says customers have understood the disruption, but the existing contracts still restrict how backup supplies can be assigned.

The Strait of Hormuz is powerful because it is a narrow route for enormous energy flows. The article says a fifth of the world’s oil and LNG shipments pass through it. Qatar’s entire LNG export trade also depends on the strait. Blocking it can therefore remove major supply from global markets and push prices higher.

When ships cannot pass, possible responses include pipelines, stored supplies, or LNG cargoes sourced from other export terminals. The article specifically says QatarEnergy studied pipelines but rejected them because pump and compression stations could become targets. Its chosen alternative is to buy LNG from US and other producers and use ships to serve higher-priced markets.

The article does not identify a separate operating route around Hormuz or quantify available alternatives. It says QatarEnergy can restart full production after a peace deal if ships are available. Until then, its trading strategy can generate some revenue, but it cannot simply replace all disrupted point-to-point deliveries.