US natural gas prices tumble as Freeport LNG announces extended shutdown
Quantum Commodity Intelligence - The Freeport LNG export terminal that was hit by a blast last week announced Tuesday an extended shutdown with the plant likely to be offline for months, and not fully operational until the end of the year.
The announcement sent US natural gas prices tumbling, while across the Atlantic, European prices rocketed, with the continent increasingly reliant on imports of US LNG as it pivots away from Russian energy.
"At this time, completion of all necessary repairs and a return to full plant operations is not expected until late 2022. A resumption of partial operations is targeted to be achieved in approximately 90 days, once the safety and security of doing so can be assured, and all regulatory clearances are obtained," said Freeport in a statement.
The facility produces about 2 billion cubic feet/day of LNG and accounted for around 20% of all LNG exports from the US last month.
July Henry Hub prices slumped over 20% following Tuesday's update, hitting a low of $7.008/mmBtu compared to the previous close of $8.609/mmBtu, before recovering to around $7.355/mmBtu early afternoon eastern time.
Following last Thursday's blast, prices tumbled nearly 10% from the previous day's 13-year high of $9.664/mmBtu to settle at $8.699/mmBtu.
European TTF natural gas prices for Jul22 closed on 14 June up over 16% at €97.04/MWh, the highest settlement in nearly a month.
Exports
According to company data, Freeport LNG operates one of the largest LNG liquefaction and export facilities globally, with a 15 million mt/year capacity.
Located at Quintana Island on the Texas coast, the company is in the process of adding a fourth train, which would expand its capacity to over 20 million mt/year in 2023.
"While Freeport has said it expects the terminal to be offline for at least three weeks, multiple regulatory agencies have investigations underway and will likely need to approve a service return," said Phil Flynn of The Price Futures Group commenting before Tuesday's Freeport update.
Flynn noted that Freeport said it had to shut down all three of its liquefaction trains and their respective pre-treatment facilities due to a fire in the liquefaction delivery system.
"From preliminary reporting, it appears that a line, presumably a vapor and not a liquids line, near the storage tanks, may have been the source of the explosion," added Flynn.
Market watchers said North Asian LNG prices were also set to rally when markets open Wednesday.
