Amid the ongoing West Asia conflict and the heavy disruption in vessel transit through the critical chokepoint of the Strait of Hormuz, India’s largest importer of liquefied natural gas (LNG) Petronet LNG has issued force majeure notices to its key supplier QatarEnergy, and its off-takers GAIL (India), Indian Oil Corporation, and Bharat Petroleum Corporation. Moreover, QatarEnergy has also issued a notice indicating a potential force majeure due to the conflict, which has forced the LNG producer to halt production. These force majeure notices are indicative of an LNG supply cut, and according to sources, gas supplies to industries in India have been reduced in the anticipation of tighter LNG deliveries to the country amid the West Asia crisis.
Shares of Petronet LNG tanked nearly 12% on Wednesday morning, before recovering slightly. Shares of other oil and gas companies with exposure to LNG—like GAIL, Indian Oil, Bharat Petroleum, Mahanagar Gas, and Indraprastha Gas—fell notably.
Force majeure is a clause in contracts that frees parties from liability or obligation when an extraordinary and unforeseeable event beyond their control occurs. Such events commonly include wars, strikes, riots, epidemics, and natural disasters. In this specific case, the force majeure notices indicate that Petronet LNG is unable to lift LNG cargoes from Qatar and supply the contracted quantities to its off-takers, and Qatar—India’s largest LNG supplier—is unable to fulfil its supply obligation.
Petronet LNG has long-term contracts to buy 8.5 million tonnes per annum (mtpa) of Qatari LNG. It also buys additional LNG volumes from Qatar from the spot market. Other Indian oil and gas companies also buy LNG from the UAE. In all, India imports around 27 mtpa of LNG from various sources, over half of which comes from the Gulf region.