Middle East turmoil boosts North American LNG demand

Damage to facilities in the Middle East and shipping vulnerabilities through the Strait of Hormuz have taken roughly 17% of Qatar’s liquefied natural gas output offline — about 1.7 billion cubic feet per day — for an estimated three to five years, prompting global buyers to seek alternative supply from U.S. and Canadian exporters.

Stacey Morris, head of energy research at VettaFi, estimated that about 20% of global LNG trade transited the Strait of Hormuz before the disruption and that the damaged capacity will remain offline while repairs are carried out. The interruption contributed to spot-price increases in Europe and Asia as buyers sought replacement cargoes.

U.S. liquefaction capacity currently under construction totals more than 18 billion cubic feet per day, according to VettaFi, and industry forecasts indicate North American export capacity could nearly double by 2031. Commonwealth LNG has approved construction, and major operators including Cheniere Energy and Venture Global are evaluating additional expansion projects that would add export capability.

Canada is also being marketed to Asian buyers because West Coast terminals avoid the Panama Canal bottleneck and offer shorter transit times to Asia compared with Gulf shipments. Two Canadian projects under construction are Woodfibre LNG, with 0.3 Bcf/d capacity and a 30% stake held by Enbridge, and Cedar LNG, with 0.4 Bcf/d capacity and a 49.9% interest held by Pembina. Both projects are expected to come online in the coming years.

Midstream companies — the pipeline and terminal operators that connect gas fields to coastal liquefaction plants — are positioned to support higher export volumes. ONEOK executives warned during an earnings call that buyers are placing greater weight on supply reliability, citing the risk that contracted energy may not arrive.

Investment products that track midstream infrastructure provide a way for investors to gain exposure to the buildout. The Alerian MLP ETF (AMLP) focuses on master limited partnerships, while the Alerian Energy Infrastructure ETF (ENFR) holds a broader mix of C-corporations and midstream names, including Canadian pipeline owners.

Repair schedules, project approvals and final investment decisions will determine how much of the displaced Qatari capacity is replaced by North American production. For now, the loss of roughly 1.7 Bcf/d of supply and the resulting price volatility have increased buyer interest in U.S. and Canadian LNG as routes less exposed to the Strait of Hormuz.