QatarEnergy extends LNG force majeure, withholding 21 cargoes from Edison

QatarEnergy's force majeure on LNG deliveries to Italy's Edison has now cut 21 cargoes through early September, deepening a supply crisis that has already halved the utility's first-quarter profit.

QatarEnergy notified Edison on June 30 that it would withhold four additional liquefied natural gas cargoes, extending force majeure through early September and bringing the total number of affected deliveries to 21 since disruptions began in April, the Italian utility said Tuesday. The cargoes were scheduled for delivery to the Adriatic LNG terminal in northern Italy.

"The continued extension of force majeure reflects the severity of production losses at Ras Laffan, where missile damage to two LNG trains has curtailed about 12.8 million tonnes per annum of capacity," said Audun Martinsen, head of supply chain research at Rystad Energy. "Every day of damaged infrastructure pushes the return to prewar production further out."

Edison holds a 25-year contract with QatarEnergy for the supply of 6.4 billion cubic meters of gas per year to Italy, a deal in force since 2009. The 21 cargoes subject to force majeure represent roughly 2.7 billion cubic meters of gas, or about 42% of the utility's annual contracted volume. Edison received just 1.6 billion cubic meters from Qatar in the first quarter, or 25% of its annual entitlement, before shipments stopped entirely at the end of March.

The supply disruption has already hit Edison's financial results. The utility, a unit of French energy group EDF, said first-quarter operating profit halved mainly because of the force majeure, and it trimmed full-year guidance because of uncertainty over the Middle East conflict. Edison has replaced 9 of the 17 cargoes canceled through mid-August with alternative supply, mainly LNG from the U.S., and said it does not expect any impact on end customers.

Golden Pass provides a partial backstop

Italy is set to begin receiving LNG from the Golden Pass export facility in Texas, a joint venture between QatarEnergy and Exxon Mobil, as early as June, according to two sources familiar with the matter. The terminal, which shipped its first cargo in April, offers Edison a way to replace Qatari volumes with U.S. supply — though Golden Pass output is itself partly owned by QatarEnergy, creating a circular exposure that limits how much of the gap it can fill.

QatarEnergy has estimated damage to its Ras Laffan facility — the world's largest LNG export terminal — will cost $20 billion in lost revenue and take up to five years to fully repair. Rystad Energy put the broader cost of repairing energy infrastructure damaged in the Iran war at at least $25 billion, with LNG train components facing the longest lead times because they are manufactured in a limited number of specialist fabrication yards globally.

What's at stake for European gas markets

The extended force majeure removes a significant chunk of supply from an already tight European gas market. With 21 cargoes — roughly 2.7 bcm — pulled from the delivery schedule between April and early September, utilities across southern Europe face higher replacement costs and reduced supply flexibility heading into the summer injection season. European benchmark TTF gas prices have remained elevated as traders price in the risk of further disruptions, and any additional extensions beyond September could tighten the market further ahead of winter heating demand.

Edison said the overall reduction in LNG volumes and the timing of deliveries will depend on the evolution of regional conflicts in the Middle East, leaving the utility and its European peers exposed to a supply chain that shows no sign of normalizing soon.

This article is for informational purposes only and does not constitute investment advice.