QatarEnergy extends force majeure on Italy’s Edison

State-backed QatarEnergy has informed the Italian energy company Edison of the cancellation of two additional liquefied natural gas (LNG) cargoes and the extension of force majeure to early July.

QatarEnergy will not deliver the two cargoes, on top of 10 already cancelled since the start of the US-Israeli and Iran conflict, Edison, a unit of French energy group EDF, said in a statement. 

Force majeure is a common clause in contracts that essentially frees both parties from liability or obligation when an extraordinary event or circumstance beyond the control of the parties, such as a war, prevents one or both parties from fulfilling their obligations under the contract.

Iranian attacks in March knocked out nearly 17 percent of Qatar’s LNG export capacity, with QatarEnergy CEO Saad Al-Kaabi estimating $20 billion in annual revenue losses for the Gulf state.

Ras Laffan is the world’s largest LNG export hub, accounting for about 20 percent of global supply. It supplies almost 30 percent of UAE gas demand via its Dolphin pipeline, a joint venture between Mubadala, Occidental Petroleum and Total.

Edison signed a 25-year contract with QatarEnergy in 2009 to supply 6.4 billion cubic metres (bcm) of gas per year to Italy. The last deliveries from Qatar were received by the end of March. 

In the first quarter of the year, the Italian company received 1.6 bcm of LNG from Qatar.

“Based on the information currently received from the seller, we expect a reduction in future deliveries at around one-third of the annual contracted volumes before taking into account any potential mitigation actions,” the statement said.

Edison ruled out any possible impact on end customers, supported by its mitigation actions and ongoing portfolio management activities.

Eight cancelled LNG cargoes have already been replaced, totalling 1 bcm of gas, it said.

The International Energy Agency estimates that 84 energy facilities across Iran’s Gulf neighbours were damaged in the first wave of attacks in March and April, including 34 that suffered “serious or very serious” damage.
“Damage to large-scale gas processing and LNG facilities is the hardest to restore, as sourcing critical equipment drives the overall timeline due to long lead times and reliance on specialised original equipment manufacturers,” Karan Satwani, senior analyst at Rystad Energy, told AGBI.

Further reading:

• Ceasefire unlikely to invalidate force majeure claims, lawyers say
• US helium distributor calls force majeure after Qatar LNG attack
• Force majeure is not a get-out-of-jail-free card