Qatar's LNG Force Majeure Demands Faster Energy Diversification Away From Middle East

As the Iran war drags on, the vulnerability of South Korea's economy — heavily dependent on Middle Eastern energy — is being laid bare. According to foreign media reports on the 24th, Qatar has decided to declare "Force Majeure" on its long-term liquefied natural gas (LNG) supply contracts with four countries including South Korea and China, citing production disruptions. This will temporarily suspend contract fulfillment. Iran has been charging exorbitant transit fees on vessels passing through the Strait of Hormuz, and is reportedly even considering legislating these fees to fund postwar reconstruction costs. South Korea has traditionally imported Middle Eastern crude oil primarily because of low shipping costs despite geopolitical risks, but a situation is unfolding where that economic advantage may be eroding.

Qatar accounts for 15% of South Korea's LNG imports. The country now faces unavoidable upward pressure on electricity prices, as it must purchase the shortfall on the short-term spot market at steep premiums. An even greater concern is that 65% of South Korea's helium imports — a critical gas in semiconductor manufacturing processes — come from Qatar as an LNG byproduct. If the helium supply shortage becomes prolonged, the semiconductor industry, a pillar of the Korean economy, faces a significant risk of disruption. The Middle East energy crisis is already sending shockwaves across domestic manufacturing. Supply disruptions of naphtha, often called the "rice of industry," have forced petrochemical plants including Yeochun NCC and LG Chem's No. 2 plant to halt operations one after another. Prices of other raw materials — urea used in fertilizer, ethanol, and aluminum — are also climbing across the board. Industry insiders are deeply anxious that talk of an "April crude oil supply crisis" may become reality.

The government and the Presidential Office on the 25th urgently launched an "Emergency Economic Review Meeting" with President Lee Jae-myung serving as the control tower. The government must wage an all-out effort to prevent the Middle East energy crisis from spreading into the real economy, including public livelihoods and industry. This is a grave situation in which the very foundations of Korean manufacturing could be shaken to their roots. There must be no gaps whatsoever in emergency measures — diversifying energy suppliers to Australia and the United States, securing essential raw materials, and reinforcing logistics systems. Policies to curb energy demand, such as extending the vehicle odd-even driving restriction to the private sector, are also necessary. This should be an occasion to accelerate energy self-sufficiency through overseas resource development and expansion of nuclear power. Japan's energy self-sufficiency rate through overseas oil and gas resource development reaches 40%, while South Korea's stands at only about 10%. Unless Seoul moves urgently now to wean its energy supply away from the Middle East, the country will inevitably face yet another crisis down the road.