Qatar halts LNG supply: How Pakistan and Bangladesh are staring at energy abyss

Qatar has halted liquefied natural gas (LNG) production after its facilities came under attack during the escalating West Asia conflict, cutting supplies to Asian buyers and exposing countries such as Pakistan and Bangladesh to an immediate energy shock.

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QatarEnergy, the state-owned petroleum company, declared force majeure on Wednesday, a legal clause invoked when companies cannot meet contractual obligations due to circumstances beyond their control. The move disrupted shipments to several Asian markets heavily reliant on Qatari gas.

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Qatar and the United Arab Emirates together account for 99% of Pakistan's LNG imports, 72% of Bangladesh's, and 53% of India's, according to data from analytics firm Kpler. 

Asia is the primary destination for Qatari gas, with LNG buyers in the region accounting for more than 80% of shipments from the country, the world's second-largest LNG producer after the United States.

The disruption poses an immediate challenge for Pakistan and Bangladesh, which operate with limited supply buffers.

"Pakistan and Bangladesh have limited storage and procurement flexibility, meaning disruption would likely trigger fast power-sector demand destruction rather than aggressive spot bidding," Go Katayama, principal insight analyst at Kpler, told CNBC.

Bangladesh already faces structural shortages in its gas system. According to the Institute for Energy Economics and Financial Analysis, the country is running a deficit of more than 1,300 million cubic feet per day.

A prolonged interruption would pressure power generation and industrial output as the peak summer season approaches, a senior official at state-run Petrobangla told Reuters. Four of Bangladesh's nine scheduled Qatari LNG cargoes for March have already crossed the Strait of Hormuz, the official said, while authorities may attempt to secure additional cargoes on the spot market.

"The real question is where prices will go," the executive said. "Prices could rise manyfold, and frankly, we simply cannot afford that."

Pakistan faces similar constraints, although industry analysts say its growing solar generation could cushion daytime electricity demand. Bangladesh, by contrast, may have to increase coal consumption and power imports from India if LNG supplies remain constrained.

India is also exposed to disruptions in Gulf energy flows. Gas companies reduced supplies to some buyers earlier this week in anticipation of tighter LNG availability from the Middle East, Reuters reported. 

India, which depends on long-term LNG contracts with Qatar for a significant share of its gas needs, has seen a temporary suspension of cargoes, leading to supply cuts up to 40 per cent for a range of industrial consumers and city gas distribution companies. 

The crisis deepened on Tuesday after Iran decided to close the Strait of Hormuz, a key maritime corridor for global energy shipments. Tehran has said the waterway is shut to most shipping, although Chinese vessels have reportedly been allowed passage due to close ties between the two countries.

The Strait is a central artery for global energy trade. Roughly 20% of the world's oil and LNG passes through the two-mile-wide shipping lanes, making it one of the most critical chokepoints in the global energy system.

Four Asian economies - China, India, Japan, and South Korea - account for 75% of oil and 59% of LNG flows through the strait. Among them, Japan and South Korea face the greatest exposure to supply shocks, sourcing 87% and 81% of their energy from imported fossil fuels. According to Zero Carbon Analytics, Japan ranks as the country most directly at risk from Hormuz disruption, followed by South Korea, India, and China.