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Superior Energy Reports Solid Operating Results (USA)

Jul 31

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Superior Energy Services, Inc. announced net income from continuing operations of $142.8 million, or $0.90 per diluted share, and net income of $141.9 million, or $0.89 per diluted share, on revenue of $1,243.3 million for the second quarter of 2012.

Subsea World News – Superior Energy Reports Solid Operating Results (USA).

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Why America’s Missing Out on the Billion-Dollar Global LNG Game

Apr 9

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By Keith Schaefer
Sun, 08 April 2012 14:59

The fast-growing Liquid Natural Gas (LNG) market is creating serious wealth around the world.

So who is profiting the most right now – and who will profit most in the coming years?

In short, it’s Australia.

The country is already the #4 exporter of LNG in the world.  Seven new plants are in various stages of planning and development – That translates to roughly $200 billion in capital investment… and an enormous number of jobs.

Now let’s look at the U.S. in the context of LNG.

America as you probably know produces massive amounts of natural gas. Yet is exports a surprisingly small amount of the resource abroad.

Both countries are close to markets – Australia is closer to Asia, which imports vast quantities of LNG, but the U.S. is also relatively close to these markets and closer to Europe, which holds some major LNG consumers, like Spain and France. Both also have robust natural gas production.

And yet Australia is light years ahead of America in sending LNG overseas… specifically by roughly 800 billion cubic feet (bcf) per year.

Here’s a brief primer on LNG before we review that gap…

LNG is created by cooling natural gas to minus 256 degrees Fahrenheit, which transforms the gas into a liquid. This liquid has about 1/600th the volume of natural gas, making its transport over long distances much simpler —and much more economic.

While turning a gas into a liquid may seem to be the stuff of science fiction, it has its roots in the 19th century when Carl Von Linde, an engineer in Munich, built the first practical compressor refrigeration machine. The first LNG plant was built roughly a century ago in West Virginia.

Of course, large-scale users of natural gas prefer to deal with the regular kind–not liquid and frozen. Since gas is easier to move and doesn’t need to be refrigerated, companies had to then develop ways to reverse the process. So you have to liquefy the gas to move it, and then “re-gasify” the natural gas to use it.  That’s a lot of work and means large infrastructure investments are required.

The gas is converted to liquid at liquefaction plants (LNG export terminals.) It is then transported in special ships that use auto-refrigeration. These LNG ocean tankers actually use a small amount of the LNG – 3%-4% during an average voyage—to power the ships. These tankers can carry around 135,000 cubic meters of liquid natural gas, which works out to about 3 billion cubic feet of warm natural gas.

So here’s how much gas that translates to: 

23 ships a day that could feed ALL the US demand for natural gas.  There are now roughly 375 ships in service worldwide.

The ships then go to an LNG import, or regasification, terminal where the LNG is converted back to a gaseous state and then either stored in tanks or sent through pipelines.

The Asian market is a major destination for LNG exporters. Japan is by far the world’s largest importer of LNG, bringing in nearly 71 million tons (8.52 bcf/d)—or almost 31 percent of all global LNG imports, according to Unit Economics.

South Korea is #2 at 34.5 million tons (4.14 bcf/d), or roughly 15 percent of global imports. Taiwan (11.3 million tons/1.36 bcf/d) and China (9.7 million tons/1.16 bcf/d) also account for a significant portion of LNG imports.

Asia isn’t the only major LNG import market, though. Europe brings in large amounts as well.  Spain is the third largest importer of LNG with 27.3 million tons (3.28 bcf/d) coming in during 2010. The United Kingdom and France are also major importers, bringing in 13.4 million tons (1.60 bcf/d) and 10.2 million tons (1.22 bcf/d) in 2010, respectively.

According to the U.S. Energy Information Administration (EIA), the U.K. received 55 percent of its LNG exports from Qatar in 2009. That same year significant quantities of the hydrocarbon entered the U.K. from Trindad and Tobago (a surprisingly robust LNG exporter with 15.4 million tons (1.85 bcf/d) sent abroad in 2010), Algeria, Egypt and Australia.

Now here’s a closer look at the LNG industry in Australia… (and what the U.S. could learn by it)

Australia only trails Qatar, Indonesia and Malaysia in LNG exports. In 2010, Australia sent 872 billion cubic feet (about 19 million tons) abroad, which was a substantial improvement over the 714 BCF exported in 2009, says the EIA.

That’s just over 8% of the world’s LNG exports. By comparison, Qatar does 25% of all LNG exports. Unit Economics states that Australia could contend with the Middle Eastern country for top spot as early as 2016.

Not surprisingly, most of Australia’s LNG exports go to the Top 4 importing countries—all in the Far East. Japan gets about 70% of Australia’s LNG exports, China gets 21%, South Korea 5% and Taiwan 4%.

There are only two LNG liquefaction plants in Australia right now, but seven additional export facilities are under construction, and four more are planned. Unit Economics reports that if all of these facilities come on line and produce their projected capacities, Australia will send a staggering 95.7 million tons (11.5 bcf/d) of natural gas abroad per year, versus the 19 million tons (2.28 bcf/d) it is exporting now—a five-fold increase!

The capital investments—and the jobs created by it—are enormous.  The Australian major Santos Ltd., along with Petroliam Nasional Bhd., are planning on shelling out $45 billion to create three LNG export facilities that would be able to convert 20.8 million tons of coal seam gas into LNG each year, reports the Wall Street Journal.

Other prominent players in Australian LNG are the BG Group PLC and the Australia Pacific LNG consortium, which is led by ConocoPhillips and Origin Energy Ltd.

“LNG is simply in high demand. and it’s not just the consequence of Fukushima,” Jon Skule Storheill, chief executive officer of Awilco LNG, told Reuters, referencing the nuclear disaster in Japan that has prompted the country to rely more heavily on LNG. “There’s Korea, there’s Taiwan, this market is just strong. Gas is clean, it’s available and it’s cheap.”

America, on the other hand, has only two export terminals.

The terminal in Kenai, Alaska, which was built in the 1960s, was idled in November of last year. (At the time, ConocoPhillips’ spokeswoman Natalie Lowman told The Associated Press the plant will be in preservation mode until spring 2012, at which time the company will re-examine the facility.)

The other is Cheniere Energy’s Sabine Pass LNG Terminal, near the border of Texas and Louisiana. This station has 4 billion cubic feet per day of capacity.

Overall, the US exported 0.2 bcf/d of LNG in 2011, according to the EIA—a total of 71.5 bcf.

Australia almost does that in just one month.  The U.S. sends most of its LNG exports to Brazil, China, Japan and South Korea.

How the U.S. Could Fit into the Global LNG Game

The LNG market is growing, and its future looks bright.

Some industry analysts predict demand for LNG globally will increase 40% in the five-year period from 2010 to 2015. This would make the annual market for LNG roughly 300 million tons.

The U.S. has the fifth-highest amount of natural gas reserves in the world, with the EIA putting the number at 273 trillion cubic feet. By comparison Australia has the 12th-highest natural gas reserves, with “only” 110 trillion cubic feet. But, as  stated above, Australia was able to ship more than 12 times as much LNG overseas in 2010 than the U.S.

The largest obstacle the U.S. faces in the LNG market is its lack of export/liquefaction terminals. With the Kenai facility going idle, the Sabine Pass terminal is the only facility in America even close to being able to regularly send LNG overseas. And even that could still be a few years away.

Now what about building LNG liquefaction plants?  Unit Economics says it can cost $3 billion for each million tons of annual capacity for the entire liquefaction supply chain, which includes production, pipelines, the port and the facility itself.

The Wall Street Journal reports there are seven additional projects seeking approval from the Department of Energy to ship LNG to most foreign nations. If all of these projects gain approval they could handle about 25 percent of U.S. gas production. However, the news source reports that approval for all of the facilities is unlikely.

An additional hurdle to the LNG market in the U.S. is political opposition to sending the energy source overseas. The American Chemistry Council has warned the U.S. government that it “should not undermine the availability of domestic natural gas,” but is not necessarily against exporting the substance.

The Sierra Club is concerned that exporting more natural gas will cause companies to increase their fracking operations. While there has been little to no evidence that fracking itself harms the environment, a groundswell of opposition to the practice has emerged, making investing in greater production difficult for the industry.

Still, for all the hurdles in exporting LNG, the U.S. also many opportunities.

In mid-March Japanese officials planned to meet with a delegation headed by Deputy Energy Secretary Daniel Poneman to reportedly request LNG exports to Japan. This appears to be a major step, as Japan had previously shied away from American LNG due to uncertainty over whether Washington would allow it to be exported.

As mentioned, Japan’s thirst for LNG is insatiable, and it will only grow stronger as the country scales back on its use of nuclear power following last year’s Fukushima Daiichi nuclear disaster. (Before the disaster, nuclear power accounted for about 30 percent of Japan’s energy production. That’s a large hole Japan will need to fill.)

Other markets that could be exploited by the U.S. are the U.K., France and Spain, all three of which are among the largest importers of LNG in the world. While Australia does send some LNG to these European countries, most of the U.S. competition will come from African countries like Nigeria and Algeria, as well as Qatar.

Another positive sign for U.S. LNG exports is that they appear to have the support of Energy Secretary Steven Chu, who has stated that sending the hydrocarbon overseas would allow America to cut into its trade deficit.

“Exporting natural gas means wealth comes into the United States,” he said, reports The Wall Street Journal.

There is much work to be done in the U.S. LNG industry to help it catch Australia—but the economics are powerful if it can.  The gears appear to be moving in the right direction, as both international markets are opening up, domestic production increases and LNG liquefaction facilities gain approval and come on line.

By. Keith Schaefer and the Oil & Gas Investments Bulletin Research Team

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Will the US Become the World’s Largest Exporter of LNG?

Apr 9

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Sabine Pass Liquefied Natural Gas (LNG) Terminal, Cameron Parish, Louisiana. LNG ship, Celestine River, moored at the unloading berth of Cheniere Energy's $800M terminal following her maiden voyage with the project's first cargo. Image: Bechtel

 

By John R. Siegel

(Barrons) By 2017 the U.S. could be the largest exporter of liquefied natural gas in the world, surpassing leading LNG exporters Qatar and Australia. There is one big “if,” however. America can produce more gas, export a surplus, improve the trade deficit, create jobs, generate taxable profits and reduce its dependence on foreign energy if the marketplace is allowed to work and politics doesn’t get in the way.

In May 2011 Cheniere Energy received an Energy Department license to export LNG from its Sabine Pass LNG import terminal in Louisiana. Cheniere subsequently reached long-term deals with the U.K.’s BG Group, Spain’s Gas Natural and India’s GAIL. Cheniere is targeting operation in 2016 and plans to export up to 730 billion cubic feet of LNG annually, roughly 3% of current U.S. gas production.

Sabine Pass originally was built as an import facility to alleviate projected U.S. gas shortages. Shale-gas technology changed that assumption radically. Now Sabine Pass is attractive because it already possesses much of the infrastructure for an export plant: LNG storage tanks, gas-handling facilities and docking terminals. Only a liquefaction plant is needed to convert natural gas into LNG. Overall, Cheniere can create its export terminal for half the investment required for a new one.

With world oil over $100 per barrel, equivalent to $17 per million BTUs of gas, versus domestic natural gas at $2.10 per million BTUs, the opportunity is obvious: Cheniere can deliver its gas to Asia or European customers well below current market prices.

Six developers with existing import terminals are following the Sabine Pass model. And Cheniere has another project in Corpus Christi. With the expansion of the Panama Canal, Gulf LNG projects can economically target the lucrative Asia market. By 2017, the U.S. could be exporting upwards of 13 billion cubic feet of LNG per day.

But exporters must overcome growing opposition to LNG exports by environmentalists and industrial users of natural gas. Exporters must also get multiple permits from environmentally conscious federal officials. And Rep. Ed Markey (D.-Mass.) has proposed legislation to bar federal approval of any LNG export terminals until 2025. Those who most fear global warming don’t want anyone anywhere to use more fossil fuel, even “cleaner” natural gas.

It is uphill for the anti-gas crowd. High oil prices are driving a transition to natural gas, even as fuel for trucks and cars. In the U.S., the T. Boone Pickens Plan would displace gasoline and diesel fuel for compressed natural gas in large trucks. Pickens estimates savings of two million barrels per day of oil imports if the nation’s fleet of 18-wheelers converts to CNG. The Pickens Plan might fail legislatively because it calls for subsidies to fuel the transition. But if CNG’s nearly $2-per-gallon price advantage over gasoline continues, the concept will evolve via natural market forces, as it should.

THE ENERGY DEPARTMENT SAYS natural gas has grown its market share in the U.S. in the past three years from 28% to 30%. Globally, the trend is similar, and LNG is integral to the global supply chain.

Despite the recession, global LNG demand has been growing at a 6% to 8% annual clip for the past 10 years. When demand collapsed in 2009, prices in Asian markets fell 50% to about $5 per million BTUs. But the price drop was also driven by the rapid growth in U.S. shale gas. U.S. natural-gas supply — flatlined for a decade at 19 trillion to 20 trillion cubic feet annually — increased 15% in the past three years due to the shale-gas revolution. Technology advances created a supply perturbation. As U.S. gas prices plunged, LNG cargoes bound for the U.S. had no market.

Global LNG markets are growing again. By late 2010, the main Asian consumers — Japan, Korea and Taiwan — were seeking more LNG, while new customers such as Thailand were entering the market. The Japan tsunami put a call on LNG imports to supplant Japan’s nuclear shutdowns, and with increasing demand, Asian markets rebounded to the $15-per-million-BTU range. After the tsunami, Germany plans to close its nuclear plants. Most of Germany’s (and all of Europe’s) new supply will be gas-fired. Given the choices, would Europe rather grow its gas supply from Russia, North Africa or the U.S.? The policy implications should be obvious, even to the U.S.

Estimates of the job benefits from U.S. LNG projects depend on a variety of assumptions. Roughly 25,000 direct construction jobs would be created if all the projects are built. Increasing the U.S. natural-gas production base by another 13 billion cubic feet might translate to 450,000 direct and indirect jobs and $16 billion in annual tax revenue for federal and state coffers.

It’s easier to forecast improved trade balances. Exporting 13 BCF per day of LNG could generate about $45 billion annually. Reaching Pickens’ goals could offset another $70 billion annually of oil imports.

Exporting energy, however, rubs a lot of people the wrong way. Pickens wants cheap natural gas for his 18-wheelers and opposes LNG exports. Industrial gas users argue that a vibrant LNG industry would propel domestic gas prices higher. A study by Deloitte said that exporting six 6 BCF per day of LNG would raise wellhead gas prices by 12 cents per million BTU (about 1% on a retail basis). Advocates of “energy independence” argue that exporting LNG would tie U.S. natural gas prices to global markets.

The Energy Department’s Office of Fossil Energy is considering whether exporting LNG is in the public interest. In the meantime — shades of Keystone XL — the department has effectively put a moratorium on new LNG export licenses.

Energy’s decision-making process balances the extent to which exporting LNG drives up prices with the economic benefits of increased production and energy exports. The price assessment comes at a time when U.S. gas fetches the same price in constant dollars as it did in 1975. Producers are now shutting down production and lowering exploration budgets. The shale-gas “job machine” is now in reverse.

Energy’s price study, released in January, found that exporting six BCF per day would increase wellhead prices by 50 to 60 cents per million BTU by 2026. The study has a myriad of assumptions and scenarios, the most fundamental of which is future gas production. In 2007, Energy predicted the U.S. would be importing 12.3 BCF a day of LNG by 2030 due to falling gas production. But primarily because of the shale-technology phenomenon, wellhead prices have tumbled from $6.25 six years ago, even as demand increased by eight BCF per day. That demand figure is larger than the six BCF assumption of the Energy study. The Energy Department is not particularly to blame, as most forecasters got it just as wrong on gas production.

Ideally, the Energy Department should move quickly and recognize free-market principles. And the administration could send a clear policy signal that natural gas is integral to the country’s energy future and that exporting LNG is good economics and consistent with its 2010 State of the Union address to double U.S. exports over five years and create two million new jobs. But Energy is moving slowly, and administration signals on natural gas are mostly lip service. The economic-benefits study should have been done by the end of March. But last week, Energy delayed its release until late summer, and said there is no timeline to review results and develop policy recommendations. Translation: after the election.

While we are fantasizing, the government could stop singling out the job-creating energy industry for higher taxes, emphasize cost/benefit analysis before adding further regulation to energy production, and get out of the business of regulating LNG exports altogether, which smacks of protectionism. To that end, should we also give veto authority to the Agriculture Department over grain exports (to lower corn prices) and the Commerce Department over auto, airplane and smartphone exports?

JOHN R. SIEGEL is the president of J.J. Richardson, a registered investment advisor that manages a hedge fund in Bethesda, Md.

Dow Jones & Company, Inc.

By gCaptain Staff On April 8, 2012

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U.S. LNG Imports Nosedive in Jan

Mar 2

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U.S. imports of liquefied natural gas in January slid 60.8% from a year earlier, according to the U.S. Department of Energy data.

LNG imports by U.S. were at 338,297 mt in January.

Most of the LNG supplies in January were shipped from Trinidad and Tobago (four cargoes), while Qatar and Yemen shipped one cargo each.

U.S. imports have been declining steadily as shippers send LNG to higher-paying markets in Europe and Asia.

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USA: EIA Expects Huge Rise in Natural Gas Production

Jan 24

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The U.S. Energy Information Administration (EIA) said Monday that it expects domestic oil and natural gas production to increase substantially.

In its newest Annual Energy Outlook EIA said it expects U.S. crude oil production to reach 6.7 million barrels per day in 2020, the highest level since 1994.

Shale gas production is expected to be the driving force behind increased natural gas production, increasing from 5.0 trillion cubic feet in 2010 to 13.6 trillion cubic feet in 2035, accounting for nearly half of all domestic natural gas production.

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CLNG: EIA Gas Export Study Reveals Only Part of Economic Picture (USA)

Jan 21

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The Center for Liquefied Natural Gas (CLNG),  yesterday said that the Energy Information Administration’s (EIA) report on the effects of increased natural gas exports on domestic gas markets is only part of a larger picture of how LNG exports will impact the U.S. economy and does not account for increased economic activity, decreased U.S. trade deficit and increased job creation that it expects will be revealed in a forthcoming macroeconomic study.

In August 2011, the Department of Energy’s Office of Fossil Energy requested that the EIA prepare the report.

The Office of Fossil Energy has also requested a second study from a third party contractor, which will analyze the macroeconomic effects of increased natural gas exports. The third party study is expected to be released later in the first quarter of 2012.

“The EIA study is just a part of the overall analysis on the economic effects of natural gas exports,” said Bill Cooper, president of the Center for Liquefied Natural Gas. “The third party report will provide a more complete economic picture by focusing on the broader macroeconomic effects, which we believe will be positive.

“The EIA study’s predicted natural gas price increases do not account for increased economic activity, decreased U.S. trade deficit and increased job creation that we expect will be revealed in the forthcoming macroeconomic study on LNG exports. GDP growth, job creation and offsetting the U.S. trade deficit would be beneficial in neutralizing any potential price effects. For example, the LNG industry expects each new export project to create thousands of jobs in the natural gas sector and related industries.

“With a 100 year supply of natural gas and more supplies being discovered in new resource areas, the United States is well positioned to meet both the domestic needs of our country and to provide clean burning natural gas to new markets. As the EIA study noted, the vast percentage of exports would be supplied by additional natural gas production. As history has taught us, the natural gas industry overwhelmingly responds to meet new markets, far beyond current-day predictions.

“Markets should ultimately decide whether or not the U.S. should engage in natural gas exports in the future, which is consistent with the long-standing policy of the Department of Energy. America’s free trade policy allows for economic growth and job creation by encouraging exports for all kinds of products, including for energy,” said Cooper.

EIA’s report examines four possible export scenarios. These scenarios consider variables of either 6 Bcf/day or 12 Bcf/day of increased natural gas exports, increasing by 1 Bcf/day per year or 3 Bcf/day per year.

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Macquarie Vies To Sell U.S. LNG To India

Jan 16

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For all the hubbub over the competitive threat posed by U.S. gas exports to Australia’s rapidly growing liquefied natural gas sector, Macquarie clearly smells an opportunity.

Indian energy company GAIL expects to sign a deal within a month with Macquarie Energy to buy 2 million tons of liquefied natural gas annually for 20 years from the Freeport LNG project in the U.S.

“We are in advanced discussions with Macquarie. I think we will be able to sign the deal in a month’s time,” a senior executive with India’s largest gas distributor told Deal Journal Australia’s colleague Rakesh Sharma in New Delhi.

Macquarie Group’s North American energy marketing and trading arm, Macquarie Energy, and Freeport LNG Expansion LP, are jointly developing and marketing liquefaction capacity at the LNG terminal in Freeport, Texas.

Macquarie’s corporate communications team weren’t immediately available for comment on the talks with GAIL.

The U.S. shale-oil and natural-gas boom has transformed the gas market, made the country a net exporter, depressed gas prices and has prompted several players to set up LNG export operations with an eye on rapidly-expanding Asian markets.

GAIL in December agreed to buy 3.5 million tons per year of LNG for over 20 years from Sabine Pass Liquefaction LLC, a unit of the U.S.-based Cheniere Energy Partners LP, at a free-on-board price indexed to the Henry Hub price, the main international benchmark for natural gas prices in North America.

The executive said the deal with Macquarie will also be linked to Henry Hub, instead of crude-oil prices. This will help GAIL get LNG at competitive rates as its end-customers in India are price sensitive, he added.

GAIL projects its gas import needs to grow seven times to 187 million standard cubic meters a day by 2015 from end-2010. The share of imported gas in its total gas use is set to rise to around 48% from 15% during the same time period, IHS Global Insight said in a note last month.

The gas pipeline utility is pushing hard to line up supplies. In September, it took a 20% stake in Houston-based Carrizo Oil & Gas Inc.’s Eagle Shale Ford acreage and in November set up a unit in Singapore for LNG trading.

“The deal [with Macquarie] is a part of company strategy to assure long-term supplies,” Bhavesh Chauhan, an analyst with Mumbai-based Angel Broking, said.

Another analyst, who didn’t wish to be named, said the deal will be a big positive as a fall in domestic Indian gas production has reduced GAIL’s transmission volumes and its pipeline network is facing low utilization.

Last month, the head of global gas at UK-based energy consultancy Wood Mackenzie said the U.S. could emerge as a major competitor to Australia’s burgeoning gas-export market, challenging the viability or expansion plans of close to a dozen Australian liquefied natural gas projects.

“We’re of the view that North America will have 20 million tons of LNG capacity maybe as early as 2018,” Woodmac’s Noel Tomnay said. “Consequently, that will remove potential market share for Australian LNG projects.”

Investment totaling over A$175 billion has been earmarked for new Australian LNG terminals focused mainly on Asia since 2007, which could catapult Australia ahead of Qatar as the world’s largest LNG exporter within a decade. Friday, Japan’s Inpex and France’s Total formally approved construction of their $34 billion Ichthys gas-export facility in the Northern Territory.

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Military warns gas imports at risk

Jan 16

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By Carola Hoyos, Defence Correspondent

UK military leaders have raised concerns that more than 80 per cent of the UK’s liquefied natural gas imports would be halted if Iran made good its threat to block the Strait of Hormuz.

Ministers and senior military figures have been warned that almost half the UK’s gas imports, and 84 per cent of its LNG imports, use the waterway, say people within the Ministry of Defence and the Department of Energy and Climate Change.

Since December, Iran has repeatedly threatened it would block the critical shipping lane at the mouth of the Gulf if its oil exports were blocked. One-fifth of the world’s oil and one-third of its LNG passes through the strait.

Lord West, former head of the Royal Navy and security adviser to Gordon Brown when the latter was prime minister, told the Financial Times that, if the strait were blockaded, the sharp fall in the UK’s gas supplies would be the country’s single most critical issue.

“I have no doubt at all that this would be the biggest problem for us,” Lord West told the Financial Times, adding that the UK would also have to weather the economic fall-out from higher global oil and gas energy prices if shipping through the strait was interrupted.

The risk has risen as refiners have stopped buying Iranian oil ahead of the expected decision to enforce sanctions in response to Tehran’s attempts to develop a nuclear arms programme.

Furthermore, Iran’s upcoming presidential elections are adding to Tehran’s need to posture, said Christopher Parry, the MoD’s former director-general of development, concepts and doctrine.

“In strategic terms, the issue with the Iranians is not so much about nuclear, it’s about the fact that they have an election in 2013. What they are trying to do is create a state of crisis and emergency, which I think will lead them to defer the election because they know they are going to get hammered unless they are able to rig it,” he said. Mr Parry said in an interview.

For the UK, that would mean an interruption of gas supplies from Qatar, which has no viable export alternative to the strait.

Since 2010, the UK’s gas imports from Qatar have risen 67 per cent, while those from Norway are down 17 per cent and the UK’s North Sea supplies have continued to dwindle. From August to October last year, the most recent period for which the DECC has data, all the UK’s LNG imports – or 46 per cent of its total gas demand – came from Qatar.

Less than 1 per cent of the UK’s oil imports travel through the strait.

The DECC said: “We are aware of the importance of Hormuz, both in terms of oil and LNG imports to the UK. We are therefore working across Whitehall on this issue. Relevant ministers have been briefed.”

Other countries are far less vulnerable than the UK, in large part because they have a more diverse pool of suppliers and more storage capacity.

Frank Harris, analyst at Wood Mackenzie, the energy consultancy, said the UK’s storage levels were high thanks to the mild winter, but he warned that the country was far behind others, such as Japan, in minimising its energy vulnerability.

“There is a lesson for UK plc here: unless you are going to start buying contractual gas on a firm basis from a diverse portfolio of suppliers, you are going to risk ending up in this situation again.”

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