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File photo of an LNG carrier in the Suez Canal

Photo: Alvaro Ardisana/Shutterstock

LNG Carriers Divert From Red Sea as Qatar Warns of Escalation

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January 16, 2024

(Bloomberg) —

Liquefied natural gas suppliers, including Qatar and Russia, are avoiding the Red Sea amid heightened risk of attacks by Houthis militants and warnings of escalation from Doha. 

The LNG tankers are joining a swath of ships that are taking the much-longer route around Africa instead of the Suez Canal as tension in the Middle East reshapes shipping routes and sends the industry into turmoil. Attacks by the US and its allies on Houthi positions in Yemen in recent days “will create a high risk of further escalation and further expansion,” Qatari Prime Minister Sheikh Mohammed Bin Abdulrahman Al Thani said at the World Economic Forum in Davos.Play Video

“This has changed how we view international trade,” he said. “LNG will be affected. There are alternative routes. They are less efficient.”

Qatar diverted three Europe-bound LNG tankers away from the Red Sea on Tuesday and toward the Cape of Good Hope in southern Africa, or to southeast Asia, according to ship-tracking data compiled by Bloomberg. 

Two others, including one controlled by Russia’s Yamal export project, diverted away from the northern entrance of the Suez Canal late Monday, according to the data. They had been waiting at the canal’s entrance, and were likely carrying gas destined for Asia.

Qatar and Russia had until now been the last major LNG suppliers continuing to use the Suez Canal to cut transit times to Europe. Gas carriers have seen the biggest drop in journeys via the Red Sea, with the number of ships falling 96% from a month ago.

The diversions come as the US warned shipowners to steer clear of the Red Sea following its attack in Yemen in retaliation for Houthi aggression. A US-owned commercial vessel was hit by an anti-ship ballistic missile fired by the Iranian-backed rebel group on Monday.

While the longer LNG journeys will tie up tankers and boost freight costs, they’re not expected to lead to shortages in Europe, given high stockpiles and subdued industrial demand there. Moving liquefied gas from Qatar to the UK via southern Africa takes about 27 days, compared with 18 through the Suez Canal, according to ICIS. 

An empty Qatari LNG tanker returning from Europe, which had paused in the Red Sea over the weekend, is now heading toward the narrow Bab el-Mandeb Strait, the site of the majority of the Houthi attacks, according to the data.

© 2024 Bloomberg L.P.

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