Implications of interrupting the Hormuz Strait in the LNG trade

Abstract The Strait of Hormuz is the most critical chokepoint of the world. Situated between the Persian Gulf and the Gulf of Oman, it connects the Middle East with the rest of the world, facilitating oil and gas exports. These exports are crucial for the energy security of the importers and vital for the Persian Gulf countries’ economies. However, the Strait is subject to military threats and conflicts from time to time between Iran and other countries. The present work explores the interruption of LNG trade and its implications through different timespans, using Agent-Based Modeling. We built a customized model for the LNG market with GIS features and validated it with past data, accurately matching the past LNG trade. The results show that the market may absorb a short disruption of one month, with the importers finding suppliers, for instance, in the Pacific market. However, in the case of closures longer than six months, the market suffers from imbalances to supply all the importers, and the global LNG trade decreases compared to the base case scenario. Finding solutions to the Hormuz blockade is difficult because there are no alternative maritime routes, and solutions involve long-term endeavors. The proposed solutions are (1) to keep a dissuasive and constant military presence; (2) to build extensive pipeline networks to connect the Middle East to other regions; (3) to build strategic international gas reserves to supply the consumers in case any disruption; and (4) to accelerate transition towards other energy clean sources.