Energy risk exposure of major economies under the Hormuz supply disruption

Naphtha: The Middle East exports approximately 1.2 million barrels per day of naphtha, 95% of which is shipped to Asia (South Korea, Japan, China, and ASEAN countries)—a vital feedstock for Asia’s plastics and petrochemical industries. According to the IEA, alternative sources are extremely scarce at present. Asian petrochemical firms can only resort to fuel switching—for example, ethylene crackers with flexible configurations in Europe and Asia may switch from naphtha to U.S.-sourced LPG; meanwhile, China may significantly ramp up idle domestic coal-to-olefins capacity to produce chemicals, thereby partially offsetting the ~1 million barrel-per-day shortfall in petrochemical products. ・Natural Gas Compared to oil, LNG has virtually no spare capacity; newly added capacity is unlikely to compensate for supply disruptions from the Middle East. Kpler data show that U.S. and Australian LNG facilities are already operating at high utilization rates, while Nigeria, Algeria, and Trinidad face physical constraints due to insufficient feed-gas supply. Collectively, all alternative sources can realistically supply less than 2 million tonnes per month—far short of the 5.8 million tonnes per month shortfall caused by Qatari production halts and Strait of Hormuz blockades. This implies fierce price competition for LNG cargoes, and market rebalancing may occur only through demand destruction—i.e., forced reductions in power and industrial consumption, switching to alternative fuels such as coal, or even regional blackouts and plant shutdowns. Spare Capacity: The Center on Global Energy Policy at Columbia University notes that LNG has had almost no spare capacity since 2022 amid a market in near-continuous crisis. The Economist reports that the U.S.—the world’s largest LNG exporter—currently operates its export terminals at ~95% capacity utilization; Australia—the second-largest LNG exporter—operates at ~90% utilization. Even if Australia were to run at full 100% capacity, its additional output of roughly 10 million tonnes would be negligible against the current massive shortfall of 85 million tonnes. For countries whose liquefaction facilities operate below 100% capacity—such as Nigeria, Algeria, Trinidad and Tobago, and Egypt—upstream natural gas supply shortages prevent rapid output increases. New Capacity: The IEA notes that new facilities coming online in the U.S., Australia, Gabon, and Mexico will add capacity, but ramp-up will be gradual (increasing from 35 billion cubic meters/year in 2025 to 95 billion cubic meters/year in 2028). Geopolitical disruptions, along with delays and cancellations of new projects, may further constrain capacity expansion. Companies with existing facilities may defer maintenance to sustain output—but this carries significant risks of equipment damage. Coal Substitution: The Center on Global Energy Policy estimates that roughly 40% of global LNG consumption—about 160 million tonnes annually—is used for power generation. In response to LNG supply disruptions, countries may temporarily restart coal-fired power plants. An estimated 80–90 million tonnes of LNG demand in the power sector could thus be substituted. Over the longer term, renewables and battery storage could replace natural gas in power generation. Comparative energy risk exposure of major economies to Middle Eastern energy supplies

Australia: A resource-limited yet influential energy exporter

According to data from the UK-based Energy Institute, Australia’s coal exports stood at 4.75 exajoules (EJ) in 2000, surpassed 6 EJ in 2006, exceeded 7 EJ in 2010, and jumped past the 8-EJ threshold directly to over 9 EJ in 2013. Thereafter—except in 2017—Australia’s coal exports consistently remained above 9 EJ. In 2015, Australia recorded its highest-ever coal export volume: 9.95 EJ. In 2022, exports declined slightly, falling below 9 EJ to 8.39 EJ. Prior to 2022, Australia was the world’s largest coal exporter. In 2015—the peak year for Australian coal exports—its shipments accounted for 31.82% of global coal exports, nearly one-third. In 2021—the final year Australia held the top position globally—it exported 9.65 EJ of coal, representing 28.68% of the world total. In 2022, Indonesia overtook Australia to become the world’s largest coal exporter, shipping 9.19 EJ of coal that year. Coal produced in Australia is primarily destined for export. In 2000, Australia’s coal production totaled 7.19 EJ, with exports amounting to 4.75 EJ—representing 66.06% of output. In 2015—the year of peak coal exports—production reached 12.8 EJ, and exports hit 9.95 EJ, accounting for 77.73% of production. 2. Rapidly expanding LNG output, sustaining three years as the world’s top LNG exporter Historically, natural gas production began in Western Australia as early as 1984. In 1989, the first two LNG trains of the Northwest Shelf project—jointly developed by Shell, Woodside, and BP—commenced operations and delivered Australia’s inaugural LNG cargo to Japan. This marked Australia’s entry into the LNG industry—seven years before Qatar, which long held the title of world’s largest LNG exporter. The most dramatic leap in Australia’s LNG production capacity and export volumes occurred between 2011 and 2019, during which its LNG export capacity surged from 2.6 billion cubic feet per day to over 11.4 billion cubic feet per day. During this period, starting in 2012, five LNG export projects were built on the Northwest Shelf: onshore projects included Pluto, Gorgon, Wheatstone, and Ichthys, while the offshore Prelude FLNG project was also commissioned. In 2015 and 2016, three additional LNG export projects—Queensland Curtis, Gladstone, and Australia Pacific—were completed on Curtis Island in Queensland’s east, all utilizing coal seam gas as feedstock. By end-2019, Australia had completed ten LNG projects, achieving an annual liquefaction and export capacity of 88 million tonnes.

Australia to Release Final Plan to Retain More LNG Output for Domestic Use

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Australia plans to legislate a Domestic Gas Reservation Scheme requiring LNG producers to reserve up to 20% of output for local buyers amid projected domestic shortfalls. The policy impacts major projects involving Shell and Santos, drawing opposition from producers concerned about investment and export reliability.

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Australia to Release Final Plan to Retain More LNG Output for Domestic Use

Australia to Release Final Plan to Retain More LNG Output for Domestic Use

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