Asia Faces LNG Supply Crisis Amid Middle Eastern Tensions

Countries across Asia are preparing for a significant disruption in liquefied natural gas (LNG) supplies due to geopolitical tensions in the Middle East. The blockade of the Strait of Hormuz and attacks on Qatar's LNG export facilities have resulted in a loss of approximately 28 million tons of LNG from the market in 2026, which is nearly the entire forecasted global supply growth for the year. Henning Gloystein, managing director for energy at Eurasia Group, noted that this situation represents a "significant tightening of the market," with reduced production expected to persist until the end of the decade.

New York Times

As the last of the LNG cargoes from the Persian Gulf arrive in Asia, countries such as China, Japan, India, and South Korea, which collectively purchase about 90% of the Middle East's LNG, are bracing for a supply gap. This gap is anticipated to worsen until at least 2028, when new U.S. gas production may alleviate some pressure. In response to the crisis, South Korea has activated a "Caution" alert for energy security, easing coal power restrictions and delaying the decommissioning of aging plants. QatarEnergy has also declared Force Majeure on long-term LNG contracts with South Korea and other partners, indicating that repairs to damaged facilities could take three to five years.

Greenpeace: Middle East Tensions Aren’t the Culprit to Korea’s Economic Crisis—Fossil Fuel Dependency IsNew York Times

The crisis is not limited to energy supply; it has broader implications for the South Korean economy. The reliance on LNG has led to significant financial strain, with KEPCO reporting an operating loss of 33 trillion KRW in 2022 and KOGAS facing 14 trillion KRW in receivables. Critics argue that the South Korean government’s approach to managing the crisis, including capping refinery prices and extending fuel tax cuts, perpetuates a cycle of dependency on fossil fuels. Greenpeace has called for a shift towards renewable energy and a comprehensive plan to reduce petroleum-based production, emphasizing that the current measures are merely temporary solutions.

Greenpeace: Middle East Tensions Aren’t the Culprit to Korea’s Economic Crisis—Fossil Fuel Dependency Is

Environmental groups and critics highlight that the South Korean government’s strategy fails to address the underlying issues of fossil fuel dependency. They argue that LNG prices are subject to global market fluctuations, which can lead to price shocks for consumers, regardless of alternative supply sources. The government's continued support for fossil fuels, including subsidies for internal combustion engines, undermines efforts to transition to renewable energy sources.

Greenpeace: Middle East Tensions Aren’t the Culprit to Korea’s Economic Crisis—Fossil Fuel Dependency Is

The ongoing crisis serves as a stark reminder of the vulnerabilities associated with fossil fuel reliance. Experts advocate for a transition to renewable energy systems that are resilient to geopolitical disruptions. Yujie Xue from Greenpeace East Asia emphasized the need for a comprehensive strategy that prioritizes renewable energy development to prevent future crises.

Greenpeace: Middle East Tensions Aren’t the Culprit to Korea’s Economic Crisis—Fossil Fuel Dependency Is

• “It’s a significant tightening of the market — we’re talking reduced production until the end of the decade,” — Henning Gloystein, Managing Director for Energy, Eurasia Group

New York Times

• “When a strait is blocked, factories stop and the cost of living explodes.” — Greenpeace East Asia

Greenpeace: Middle East Tensions Aren’t the Culprit to Korea’s Economic Crisis—Fossil Fuel Dependency Is

While the South Korean government claims that Qatari LNG, which constitutes 14% of its imports, can be replaced by alternative sources, critics argue that this perspective overlooks the volatility of global LNG prices and the systemic issues tied to fossil fuel dependency.

Greenpeace: Middle East Tensions Aren’t the Culprit to Korea’s Economic Crisis—Fossil Fuel Dependency Is