Qatar’s LNG Halt Tests Asian Energy Security, Drives Coal Demand

The recent halt in liquified natural gas (LNG) production by Qatar, a major global supplier, is significantly impacting energy markets in Asia and Europe, forcing importers to seek alternative sources and, in some cases, rely more heavily on coal. The disruption, stemming from the conflict in Iran and its effect on Gulf shipping lanes, has sent LNG prices soaring and exposed vulnerabilities in the energy supply chains of key Asian economies.

Qatar’s Production Halt and Global LNG Supply

On March 2, 2026, QatarEnergy halted LNG production at Ras Laffan, the world’s largest liquefaction complex, and issued force majeure notices to customers due to the ongoing conflict in Iran. Approximately 20% of the global LNG supply passes through the Gulf, with Qatar being a primary source. The closure of the Strait of Hormuz to tanker traffic has immediately impacted LNG deliveries to Asia, which receives 85% of Qatar’s LNG exports.

Impact on Asian Markets

The supply shock is particularly acute for several Asian nations heavily reliant on Qatari LNG. In 2025, Qatar and the UAE accounted for 30% of China’s total LNG imports. However, South Asian economies are even more exposed, with Qatar supplying around 53% of India’s, 72% of Bangladesh’s, and 99% of Pakistan’s LNG imports.

Spot LNG prices in Asia have surged by 70% to three-year highs, making it difficult for many countries to afford. Nations are turning to coal as a buffer to mitigate the shortfall. While coal prices have also increased (approximately 14% since the start of the conflict), the rise is significantly less dramatic than the 70% jump in LNG prices.

Varying Degrees of Vulnerability

The ability to switch to coal varies across Asia. China and India, being major coal consumers, have a “meaningful substitution buffer” to lessen the impact of price spikes. Qatar’s 142 MTPA LNG expansion was slated to coincide with China’s SMR timeline in 2026, but the current disruption complicates these plans.

South Korea, Taiwan, and Singapore are particularly vulnerable due to their high reliance on gas for power generation (at least a quarter of their power mix). These countries are likely to face increased exposure to high spot LNG prices if Qatari supplies remain disrupted.

Demand Destruction and Mitigation Strategies

Analysts predict potential demand destruction in both Northeast and South Asia if Qatari supplies do not return soon. Wood Mackenzie estimates that Northeast Asian LNG demand could fall by 4-5 million tons through the third quarter of 2026 if disruptions last two months. They previously projected 2.2% growth in Northeast Asian LNG demand for 2026, but the supply shock is likely to halt that expansion.

Countries are employing various strategies to cope with the crisis. India is facing curtailments in industrial gas use, Pakistan is combining demand curtailment, fuel switching, and renewable energy expansion, and Bangladesh is already rationing gas supply due to the unsustainable cost of spot LNG.

Strategic Shifts and Long-Term Implications

The crisis highlights the importance of energy diversification and security. Qatar has been shifting its LNG deals towards Western nations, influenced by pressure from the U.S. And Europe, despite previously securing major long-term contracts with China. This situation underscores the geopolitical complexities of the global energy market and the potential for disruptions to impact energy security worldwide.