An unexpected outage at Freeport LNG this week (6 May) has once again thrown a spotlight on the expanded role of US export plants in stabilising international LNG markets.
The three-train site, the second largest in the US and seventh largest globally, shut down in less than 10 minutes, putting LNG back into the market to depress US prices and push up European prices for the prospects of less supply.
BTU Analytics confirmed natural gas deliveries to the LNG facility had dropped to about 0.35 bcf/day on Tuesday, though flows have since increased to nearly 2 Bcf/day, which is typical.
Freeport is critically important to US and European energy markets due to its large export capacity, meaning even a short disruption can cause major disruption.
It is more sensitive to power outages than other plants because electric motors are used in its liquefaction process. This is beneficial in driving down emissions and increasing efficiency, but can leave it vulnerable. A storm in January also caused a power feed problem and closure.
Three years ago, a fire at Freeport led to a temporary shutdown, and it also experienced disruption from Hurricane Beryl last year.
A fourth train is in the offing and expected to be onstream around 2028.
Writing on LinkedIn, Edmund Knolle, President and CEO at Gulf Midstream Operations, which transports and stores natural gas across the Gulf of Mexico and US Gulf coast, said the outage highlighted the role of LNG feed gas, which is always subject to large swings.
He said CFOs of companies supplying gas to LNG export facilities in Texas “might want to seriously consider hedging their exposure to this type of risk” with underground storage capacity in the market area.
“This risk is only getting bigger as LNG flows on the Texas coast continue to grow, impacting not just suppliers to LNG plants, but all market participants,” he said.
“Today, it’s a price hit. Tomorrow, we could be looking at days where the market fails to clear due to a lack of injection capacity. New storage takes years to develop.”
The new US administration is fast-tracking development, with licences recently issued to Delfin LNG and Venture Global CP2.
Venture Global reported in early April that the number of LNG cargoes shipped during Q1 met projections, but fees from its Calcasieu Pass and Plaquemines LNG export terminals fell short of its earlier guidance.
