As tensions between Iran and the western world increase, the country’s threat to shut down the Strait of Hormuz weighs increasingly on energy markets. While most of the attention has focused on what a closure would mean for oil transport, analysts at Raymond James & Associates Inc. said Monday on a percentage basis, the implications would be greater for liquefied natural gas (LNG) shipments.

“Thought one-sixth of the world’s crude flowing through Hormuz was big? When it comes to LNG, it’s even worse,” the analysts said in a note. “Qatar is the world’s No. 1 producer of LNG, with a market share near 25%, and the United Arab Emirates (UAE) is also a player. Unlike oil, there is no practical way for LNG shipments from these two countries to bypass Hormuz. Thus, a blockade would instantly halt over a quarter of the global supply of LNG.”

Concerns over Iran’s nuclear ambitions have been rising, particularly since the country said it had produced its first nuclear fuel rod. On Monday it was reported that Iran had sentenced to death a former U.S. Marine for alleged spying.

Threats to the strait, through which pass 15-17 million bbl of oil daily, have kept oil prices elevated. Adding to this, on Monday reports said the UAE had delayed the launch of a crude oil pipeline to bypass the strait, which separates Iran and Oman. The pipeline is now expected to be operational in about six months.

Any crimp in LNG supplies caused by blockage of the strait would be of little consequence to the United States given its large domestic gas supply base and decreasing reliance on LNG imports. The North America has yet to become a significant exporter of LNG. Asian markets would be hardest hit by a strait blockage, Raymond James said.

“The majority of LNG shipments out of the Persian Gulf head eastward to Asia (similar to oil),” the analysts said. “…[T]hree of the top four purchasers of LNG from Qatar and the UAE are Japan, India and Korea. In total, just over half of these shipments go to Asia.”

These countries would get the double whammy of a hit to LNG and oil imports should the strait be blocked, they said. Japan, the No. 1 LNG importer, would be hardest hit, and this would come at a time when the country has been relying more heavily on LNG in the wake of its nuclear power disaster at Fukushima last year (see Daily GPI, Aug. 2, 2011). Japan also uses a significant amount of oil for power generation, Raymond James said. “If both oil and LNG supply are disrupted, Japan would face a colossal problem, possibly having to resort to energy rationing.”

Since the major oil companies have not been substantial players in Persian Gulf oil production of late, their greatest exposure to a Strait of Hormuz shutdown would come from LNG via their relationship with Qatar’s Qatargas and RasGas, the analysts said.

“The larger one, Qatargas, has seven [LNG] trains with total liquefaction capacity of 42 [million metric tons per year], making it the world’s largest single LNG supplier…ExxonMobil has the most exposure to Qatargas (in absolute terms) of any international company,” the analysts said, noting that other partners include Total, ConocoPhillips, Royal Dutch Shell, Marubeni and Mitsui.

“RasGas, the world’s second-largest LNG supplier, also has seven trains, with a total of 37 [million metric tons per year of capacity]. ExxonMobil, with a 30% stake, is the only international partner in RasGas.”

©Copyright 2012Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.