The Gulf’s most valuable export may be trust

The Arabian Gulf's most valuable export may be trust, as buyers worldwide grapple with the region's supply chain vulnerabilities. Since February, the world has questioned whether hydrocarbon supplies can reach international markets, but the crucial question now is how much buyers want to rely on gas. Trust is intangible, yet it is visibly eroding in the data.

EU gas demand fell 16% below its five-year average in 2023, while industrial consumption failed to recover even after wholesale prices dropped from their 2022 highs. In Asia, Europe's scramble for cargoes priced out more price-sensitive buyers, leading governments to reconsider their exposure to imported gas. The current disruption has heightened concerns about gas dependence.

Damage at Ras Laffan reduced Qatari export capacity by 12.8 million tonnes annually, or 17% of the total, with repairs expected to take three to five years. Force majeure extensions and cancellations have run into November, prompting buyers to seek alternatives. Some have switched to coal, curtailed industrial production, or accelerated nuclear restarts as emergency measures.

However, these measures are becoming long-term strategies as customers design energy systems that require less gas. This trust deficit is turning into demand destruction.

Buyers are responding by purchasing spot cargoes from the US, contracting US LNG, and exploring alternative routes. For example, QatarEnergy bought 33 spot cargoes from the US in July alone, up from four in 2023. Aluminium Bahrain shifted 1,400km of its exports overland to Jeddah, and Saudi Arabia moved its East-West pipeline to the Red Sea to bypass Hormuz. These actions demonstrate that customers are evaluating suppliers based on their behavior during disruptions.

Trust is built through honoring contracts under stress, providing early and credible information about disruptions, and preparing alternative routes before they're needed. Erosion occurs through silence and inaction. Asian buyers, particularly China, India, and South Korea, are most at risk, accounting for over half of the LNG moving through Hormuz.

They are actively seeking long-term contracts with US suppliers, affordability, and contractual structure to hedge against future disruptions. The Gulf's most valuable export is the assumption that supply will continue, which the region must defend to maintain its commercial leadership.