By: OrePulse

Poland's state-controlled energy group Orlen has canceled a long-term liquefied natural gas supply contract with QatarEnergy, becoming the first buyer to terminate such an agreement since the Qatari producer declared force majeure on its LNG exports.

Orlen said in a regulatory filing released late Tuesday that QatarEnergy had been unable to deliver the 1 million tonnes of LNG it was contracted to supply each year, and pointed to that shortfall as grounds for ending the agreement.

Signed in 2009, the contract saw its first deliveries in 2016 and had been scheduled to continue until 2034 — meaning roughly eight years remained on the agreement when Orlen canceled it.

QatarEnergy declared force majeure on its LNG exports in the spring, citing disruption to shipping through the Strait of Hormuz linked to the conflict involving Iran. The strait is the maritime route through which Qatar ships the large majority of its LNG production to international buyers. A force majeure declaration allows a supplier to suspend its contractual delivery obligations for events outside its control, without being held liable for the resulting shortfall to its customers. QatarEnergy said it extended the force majeure declaration through the end of 2026, in a move announced at the end of October, meaning the measure will have been in place for well over a year by the time it is next due to expire.

The scale of the disruption is reflected in Qatar's export volumes. Qatar's LNG exports fell to 2.7 million tonnes in October, down from about 6.2 million tonnes in February, trade data show, a decline of more than half over the eight months.

Separate shipping data showed LNG tanker transits through the Strait of Hormuz rose to 31 in October, an increase from 23 in September and the highest monthly total recorded since February. Most of the cargoes loaded during October were shipped from Qatar's Ras Laffan terminal, the data showed, despite the continuing force majeure declaration. Ras Laffan is Qatar's main LNG export terminal and the loading point for the large majority of its gas exports.

QatarEnergy has previously quantified the financial impact of the disruption. In March, the company said attacks on tankers in the Gulf connected to the conflict had cut its export capacity by about 17% and cost an estimated $20 billion in lost annual revenue. QatarEnergy has since worked to secure alternative supply, including increased volumes from U.S. producer Cheniere Energy, to help offset the reduced capacity available to its own customers.

Orlen's cancellation is the first termination of a long-term supply contract by a QatarEnergy customer since the force majeure declaration took effect earlier this year. The contract had been in force for 17 years, with deliveries running for a decade before the cancellation, making it one of the longer-standing agreements in QatarEnergy's customer base to be affected by the disruption. Orlen did not immediately indicate whether it planned to source LNG from other suppliers to replace the canceled volumes.

Taken together, the sequence of events spans the declaration of force majeure in the spring, QatarEnergy's disclosure in March of the financial toll from the disruption, the extension of the force majeure at the end of October, and Orlen's cancellation filing in mid-November. The termination is the first of its kind since the force majeure took effect, and could be closely watched by other European buyers that hold similar long-term LNG supply agreements with QatarEnergy, as well as by QatarEnergy itself as it manages the rest of its long-term contract book amid the continuing disruption to its export capacity.