BT EXPLAINER: Why Iran's attack on Qatar's Ras Laffan is terrible news for the world

The Iran war is moving very fast from being a show of pure military strength to economic warfare. The die was cast when Israel bombed the South Pars gas field—the world’s largest gas reserve that is shared between Iran and Qatar. It covers 9,700 square kilometres and is reported to account for 8% of the world’s proven gas reserves according to the International Energy Agency.

Also read: The Ras Laffan Effect: Energy shock for import-dependent India

Soon after the bombing of South Pars, Iran bombed Ras Laffan Industrial City, Qatar’s main energy hub that accounts for a fifth of global gas supply. QatarEnergy, the state-owned gas company, has already declared force majeure after its facilities were hit by Iranian drones in the first week of March.

This attack has only worsened things. Iran has warned the Gulf nations that many energy assets in the region could be targeted. It has already attacked Saudi Aramco’s SAMREF refinery in Yanbu with drones. Other facilities that could be impacted, according to Iran, include the Jubail Petrochemical complex, the UAE’s Al Hosn gas field, and Qatar’s Mesaieed Petrochemical Complex.

Also read: Will Hormuz crossings cost more? Iran considers tolls on global shipping route

Why is the South Pars attack so important?

This was the first attack on Iran’s core energy infrastructure. It is estimated that the South Pars field has between 14 trillion and 51 trillion cubic metres of gas. It accounts for 70% of Iran’s gas production and is its biggest source of domestic energy supply. The strike on South Pars could worsen Iran’s severe power shortage. 

What does this mean for India and the world?

India is among the leading importers of LNG globally—behind China, Japan, and South Korea. Most of that comes from Qatar, the UAE, and the US. Qatar, the world’s second-largest exporter of LNG, accounts for close to half of India’s LNG needs. India has renewed a 20-year deal with QatarEnergy to supply 7.5 mmtpa of LNG to India annually. India currently has eight LNG terminals with a capacity of 52.7 million metric tonnes per annum.

While there are some cargoes carrying LNG on the high seas to India, their transit is impacted due to delays in the Strait of Hormuz. Right now, it is not clear when Ras Laffan will resume production again soon. It is believed that it could probably resume production on a sustained basis in mid-2026, provided there are no more attacks.

If the current crisis continues, India will need to curtail its gas consumption. That could impact industry—primarily power and fertilisers. If the crisis continues, it could impact piped gas consumers in the cities.

What has been the impact on crude oil prices?

The strike has already impacted crude oil prices. Brent spot is trading at over $108 with some contracts touching $113 a barrel. According to energy experts, the possibility of crude oil at $200 per barrel that Iran had initially threatened could well happen if the war continues. Already, Arab light crude is at $127, and the Kuwait export blend has hit $153.

What has been the US response?

US President Donald J Trump has on Truth Social claimed that “the United States knew nothing of this particular attack.” He also went on to add that “no more attacks will be made by Israel pertaining to this extremely important and valuable South Pars field unless Iran unwisely decides to attack Qatar,” adding  “In which instance the United States of America, with or without the help or consent of Israel, will massively blow up the entirety of the South Pars Gas Field at an amount of strength and power that Iran has never seen or witnessed before.”

Iran has already responded to the attack on South Pars by bombing Ras Laffan.

What are the options before India?

If gas supplies do not resume from the Middle East quickly, India needs to tie-up deals with other global suppliers—the United States, Australia and Norway. That could help tide the immediate shortage. The gas would be more expensive and would take more time to arrive. Many key industries could be impacted.

However, as India aims to have gas accounting for 15% of our energy mix by 2030, we need to seriously think in terms of building strategic storage reserves for gas, quite on the lines of the underground facilities we have now to store crude oil. It is believed that the Ministry of Petroleum and Natural Gas has drafted a proposal to create a dedicated facility for strategic gas reserves. One possibility being considered is using the salt caverns in Bikaner (Rajasthan) for gas storage. After all, all other big gas consumers already have strategic gas reserves.